One method to get benefits from your insurance company for a disability is to ask for a disability settlement. There are companies that initiate this and call some of their long term clients who have been receiving disability benefits for quite a while. In order to find out if a buy-out is right for you, you need to know the basics.
What are long term disability settlements?
It is common knowledge that every insurance policy holder is entitled to rights to a claim whenever they get a disability. Sometimes, the company proposes to give you a one-time lump sum payment in exchange for you to waive your rights to a claim. In other words, instead of them paying you monthly benefits for an indefinite period of time, they would like to give you a large amount in one payout. The catch here is if you agree, the lump sum will only be a calculated amount based on a certain period and rate. Unlike when you keep your policy where you can receive benefits for life if you qualify.
Some would call a disability insurance settlement offer a buy-out because the insurance provider is literally buying your policy from you. Once you agree, you cannot apply for a claim anymore and the company is not obligated to provide any kind of financial support to you.
It is good to note that you cannot request for a buyout on your own. This is decided on the sole discretion of the company and the best you can do is suggest it, if you have it in mind. If you want to send signals that you want a disability lump sum payment, you need to know these three things first:
How the Lump Sum is Calculated
Since both sides have a few things at stake, you can consider the buy-out as a negotiation. Everyone knows that insurance companies are out to make money wherever channel they exploit. Thus, those asking you for a buy-out means they see paying you long term more disadvantageous than paying you right now. If you want them to give you an offer, it has to make financial sense for the company to do so.
Keep in mind that you will not get all of the proceeds you might get if you opt to receive monthly compensation. Every company has their own formula, so make sure that you find this out. Some of the things they consider when calculating long term disability settlement amounts are:
- Life expectancy
- Mortality risk
- Current commercial bonds yield
- Reserves on your claim
- The impact of your disability proof
- The success percentage of them being able to convince the court that you can still work a certain position
The conflict usually arises on this stage because a lot of claimants do not understand the concept of present value. Most expect to get an x amount of money multiplied to the number of years until they reach death. The lump-sum amount usually does not go over 75% of the present value of a policy, so it appears to be very little to claimants. In order to get a decent amount in your negotiation, you can hire a disability settlement attorney to help in negotiating a more favorable amount.
Be Discreet About Your Want to Settle
As already mentioned, you cannot request for a settlement on your own. The company has 100% control over this. If you feel that it makes more sense for them to give you a lump sum, you need to be very discreet about sending the signals.
Asking your company for a lump sum long term disability payment might be taken the wrong way. You might say something that may invalidate your right to get benefits. The best thing to do here is to have a clear reason why you want it. You can’t give out a reason that will make them think that you just want to get the money and use it to find work somewhere else. In order to come up with a good reason, you can ask advice from an experience lawyer.
Make Sure That You Really Need A Buyout
Suggesting a buyout to your company can already raise a lot of red flags, so if you don’t want any trouble and don’t really need the money, then don’t even think about it. In the first place, make sure that it actually makes sense for you to ask for a lump sum payout. Apart from getting less than you would if you opt for monthly benefits, long term disability settlement is taxable too. You are looking at around half of the benefits you can get if you prefer for long term disability compensation.
If your insurance claim was denied, your benefits have been terminated or need legal advice on your long term disability claim, contact us today for your free consultation. Our expert Long Term Disability Lawyer team will help your denied insurance claim.
Moreover, if you or anyone who has access to the money is not very good at handling it, it is best to not get a large amount instantly. Once you get the payout, you won’t be receiving anymore. If you spend it all immediately, then you will have to look for another means of income. Think about your situation as objectively as possible and see what you think is best.