Insurance companies sell disability insurance polices with the hope that they will never need to pay monthly benefits to an insured. Once an insurance company becomes obligated to pay an insured monthly disability benefits, the insurance company is losing money.

In effort to cut their losses, insurance companies are always interested in the opportunity to buy-out an insured’s disability policy for a one-time lump sum amount. We have represented hundreds of individuals in an effort to obtain the maximum lump-sum buyout possible. We work closely with actuaries and financial consultants in order to maximize your buy-out.

Every insurance company has their own methodology and formulas for determining the value of an insured’s disability income policy. As a result handling buy-outs with almost every insurance company, we are well aware of each companies valuation methods. There are multiple factors involved in determining the value of an insured’s disability income policy. Some of the factors that insurance companies will consider are:

• the life expectancy and mortality of the insured
• the current corporate bond rate
• the likelihood that the insured will remain totally or residually disabled
• the amount of insurance company reserves for the specific policy
• the present value of future benefits
  
  

In every lump-sum settlement, the insurance companies will make an offer that is discounted to present value dollars. This means that if the future value of an insured’s disability payments in 20 years will be one million dollars, then the present value is the amount of money an insured needs today to pay one million dollars over 20 years at current interest rates. The present value amount is always less than future value. Insurance companies will never pay 100% of the present value, since there is no financial benefit to them to do so. They will however, use the previously stated factors in arriving at a buy back amount.

Lump sum buy backs are not advisable for everyone. However, they often make sense for an insured for the following reasons:

• cash received is often tax free to be invested as you desire;
• no risk of future denials or uncertainty of upcoming benefits;
• monthly benefits end at death;
• cash received now can be used for estate planning or new venture;
• no longer subject to insurance company solvency.
  
  

If you are interested in pursuing a lump-sum buyout or have been solicited by your insurance company for a buy-out, contact our law firm to make sure you are receiving the maximum buy-out you could receive. We work closely with actuaries and financial consultants in order to maximize your buy-out.