A lump sum buy-out of your long term disability insurance benefits occurs when a disability insurance company offers to buy-out the insured's monthly disability insurance benefits in exchange for a one-time lump sum payment and the insured accepts the buy-out. For example, if you are 35 and are receiving $1,500 per month in disability benefits 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?
Your disability insurance company will review several factors to reach its opinion on the value of the buy-out. 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 should consider a number of factors when weighing a buy-out offer, 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
- Cashing out and seeking other opportunities
A disability insurance policy buy-out may or may not make sense for the affected person. Such offers need to be reviewed on a case by case basis.
You can reach 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].
