Lump Sum Buy-Outs of Long Term Disability Insurance Benefits

A lump sum buy-out of your long term disability insurance benefits is when a disability insurance company offers to buy-out your monthly disability insurance benefits in exchange for a one-time lump sum amount.  For example, if you are 35 and are receiving $1,500 per month until the age of 65, that would equate to $540,000 in total disability insurance benefits paid to you during the 30 year period.  What if the disability insurance company were interested in negotiating a buy-out for $100,000?  Would you prefer to have $100,000 today, or continue to collect $1,500 per month over the next 30 years?    Determining if and how much of a one-time lump sum amount to accept can be a difficult decision.

Your disability insurance company will review and analyze your long term disability policy and other factors to determine the value of your policy.  This valuation method is devised to offer you an amount that may not be in your best financial interest to accept.  When calculating your buy-out offer, the insurer takes into consideration various factors including:

  • Mortality tables
  • Bond rates
  • Disability abatement probability
  • Present value calculations

As the policyholder, you may not know and understand if the buy-out proposition is fair and reasonable.   You may not know how to take into consideration various factors including:

  • Future value of lump sum amount
  • Your realistic life expectancy
  • Risk of insurer terminating your disability benefits
  • Solvency of disability insurance company
  • Freedom from continued insurance company reviews of your eligibility and intimidation tactics
  • Cashing out and seeking other opportunities harassment free

A disability insurance policy buy-out may or may not make sense, and it usually boils down to the buy-out offered by the insurer. 

The Law Firm of J.P. Gonzalez-Sirgo, P.A. represents individuals that have had their valid long term disability benefits denied, delayed or terminated.

You can reach Miami Long Term Disability Insurance Claims Lawyer J.P. Gonzalez-Sirgo by dialing his direct number at (786) 272-5841, calling the main office at (305) 461-1095, or Toll Free at 1 (866) 71-CLAIM or email J.P. directly at [email protected].

1 Comments
I was told by the Insurance that Missouri does not allow lump sum payouts for long term disability, is this true, what states DO Allow for lump sum payments? I'm thinking of moving to my son's home and wondered which states allow it. Would help pay for the many medical bills I am experiencing.thank you
by cgroner August 4, 2013 at 10:47 PM
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