When insurance companies sell long-term disability policies, their hope is that the policy owner will never request benefits. However, when a disability claim is successful, the insurance company will seek options that limit how much they have to pay the claimant. If they have to pay monthly benefits, this ultimately results in a loss of money. Because of this, insurers may offer you a one-time lump-sum payment. This helps limit the amount they pay and gives those suffering from a disability a large infusion of cash.
At Julie A. Rice, Attorney at Law, & Affiliates, we have represented hundreds of individuals in Atlanta and throughout Georgia and Florida get the disability benefits they deserve. We work closely with our clients and consult with actuaries, financial consultants and physicians when working to maximize the buyout offer that you receive.
How Are Lump-Sum Values Calculated?
Each insurer uses their own unique formula when calculating the lump-sum value of a claimant’s policy. This makes it important to work with a law firm that has worked directly with many different insurance companies. We have worked with most major disability insurers, and we understand the different methods that they use.
Some of the common factors that insurance companies consider include:
- Life expectancy and mortality
- Current bond rates
- Likelihood that the disability is permanent
- The amount reserved within the policy
- The value of future monthly benefits
Lump-sum offers are always discounted to today’s dollars. For example, imagine the future value of your policy over the next 15 years is $900,000. This equates to receiving $5,000 a month over the next 180 months. If we assume a 5 percent interest rate, the present value of your lump-sum payment would be $450,000. This means that if you invested that $450,000 and received 5 percent annual interest, you would have $900,000 after 15 years.
Should I Consider A Lump-Sum Buyback?
As a general rule, these are not advisable. However, in limited circumstances, they may be appropriate. Possible benefits of a buyback include:
- The cash you receive is tax-free, thereby allowing you to invest it in the manner you believe is best for you
- There is no risk of being denied benefits in the future
- There is no uncertainty about your future benefits
- The money can be used immediately for a new business venture or for recreational purposes
- The risk of an insurance company’s solvency is eliminated
- You can return to work without an insurance company seeking to halt your disability benefits
Let Us Help You With Your Lump-Sum Negotiations
If you are interested in pursuing a lump-sum disability buyout, contact us at (770) 865-8654 or through our contact form. Our lump-sum negotiations lawyers in Georgia work closely with actuaries and financial consultants in order to maximize your buyout so get in touch with us today before making a final decision.