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Is a Long Term Disability Buyout Settlement a Good Idea For You?

Tucker Law Group
April 17, 2017

Watch this video as Long Term Disability Insurance Attorney John V. Tucker explains lump sum buyouts in Disability Insurance claims and gives you information to decide if a lump sum settlement is right for you.

When you are approved for Long Term Disability (LTD) benefits, you receive a monthly payment.  Sometimes, the LTD Insurance company will offer a buyout to end your claim. This video explains what a lump sum buyout is.  It helps you understand how buyouts are calculated, including an explanation of what “present value” is – a key concept in understand LTD lump sum settlements.

This video also helps you consider several factors which will play into whether you want to take a buyout offer, including:

  • What percentage of the total benefits is being offered?
  • How risky is staying on claim?
  • How much are you willing to deal with the disability insurance company in the future?
  • Do you have a plan for the money if you settle?

You want an attorney that will work with you to come up with an individualized solution.  Beware of firms that just want to settle your claim.  Often, that is not the best decision for you, and it may only be in the lawyer’s best interest.

You want a disability attorney that gives you the pros and cons of settling.  Generally, you will have to give something up if you decide to settle.  You need an attorney that will honestly answer your questions to help you understand what you are giving up and what you are getting.

If you want to talk about a buyout of your Long Term Disability claim, contact Disability Insurance & ERISA Attorney John V. Tucker online or call us toll free nationwide at (866) 233-5044.

Video Transcript
Is a long term disability buyout settlement right for you? I’m John Tucker. I’m a disability attorney and I represent people all over the country in disability claims like yours. 

I’ve handled cases against all of the major disability insurance companies. Aetna, Cigna, Lincoln, Metlife, Prudential, Unum and others, and every one of them has at some point over the twenty-five years of my practice have offered my clients a buyout settlement. So let’s talk about things that you need to know when thinking about a buyout settlement. First, what is it?

A lump-sum buyout is exactly what it sounds like, you’re going to get one check that will buy you out of your claim forever. That means no future monthly payments. Now the insurance company is not going to send you all of those future payments added up and pay you 100 cents on the dollar. They have no incentive to do that. That would be a settlement, that would be completely giving up and giving you every nickel you are ever entitled to. They are going to offer you some portion of that.

And an important concept you need to understand is called present value. Present value is a financial concept that deals with the time value of money. That stream of payments in the future is not worth all of those future dollars added up. It’s worth an amount of money you can get today and invest at some modest interest rate that would add up at the end of all of your future payments to be the same amount of money.

Think about the lottery, when someone wins a 20 million dollar lottery they might take the lump-sum buyout of 6 million dollars. The ideas is that if you won the 20 million dollar lottery and you were going to get a million a year for twenty years, something like 6 million dollars would grow to 20 million dollars over that 20 years if it was all invested. So the insurance company is going to calculate the present value. You need to do the same thing and you can go online and do a search for a present value calculator tool or something like that and you’ll find something that will help you calculate the present value of your claim. 

So here is a few things to think about when a lump sum buyout offer is made to you. First, the insurance company is offering you some percentage of the benefits. You need to know how much of a percentage of the present value that is. That lets you compare apples to apples. Second, the cutoff factor. They might cut you off if you don’t take that buyout, they may stop paying you in the future because they claim that you are not disabled anymore. Are you willing to deal with that? I’ve had plenty of clients tell me that they just couldn’t believe that they got cut off because their disability was so obvious. I’ve had clients cutoff after 13, 15 even 19 or 20 years on claim. It’s all about money to the insurance company, if they can cut you off they will.

Next, hassle. Are you willing to deal with the hassle of that insurance adjuster contacting you regularly for as long as those future payments are going to come in the door?  And finally, and this is not really a legal factor, do you have something you can do with the money they are offering you? You might decide it’s better to take the lump sum buyout because you want to buy a home or something like that. That’s a decision that you have to make and it’s not necessarily an attorney like me can give you advice about. When you think about all of those things together, you can formulate a decision on whether a buyout is right for you. 

Know this there is no one size fits all answer. You and your attorney need to analyze your individual situation, you need good advice from an attorney. Whether you have an ERISA case under your employer’s group plan or you have a private disability policy, you need an attorney experienced in those types of claims. 

One final point, beware of settlement mills. There are attorneys out there that will settle a claim to make a quick buck and I’m talking pennies on a dollar. And they don’t mind recommending a settlement to you even though it’s too low. I will candidly tell you, it’s rare that I recommend a lump sum settlement for one of my clients that’s on claim. Why? They’re paying you, they recognized you’re disabled. If we work with our clients, we work to keep them on claim and that’s the way they maximize the most amount they can get out of their claim. You need to do what’s right for you and we understand that so we will work with you to come up with an individual solution for your case. Just beware of other firms that may not think about it the same way. 

I know you may questions about your long term disability claim or a lump sum buyout. If you do, I want you to call the number on your screen, let’s talk about your claim. I handle cases like yours every day. I’m John Tucker. Thanks for watching.