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Why consider a lump-sum buyout of your disability insurance policy?


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Why Consider a Lump-sum Buyout of Your Disability Insurance Policy?

If you already are on long term disability, and you’re looking for a lump sum buyout, there are multiple reasons to consider a lump sum buyout. No.1 and probably the most important reason is security, and that means security for your family. With long term disability policies, there are no rights to survivorship, meaning, it’s not like a life insurance policy where God forbid, if something were to happen to you, these benefits will continue to be paid.

Many people who consider a lump sum buyout do it because they want to guarantee for their family that they are going to get a stream of payment for the next 10 or 15 years in the event that something were to happen to them. The other reason that people consider buyouts is that they are sick and tired of dealing with the disability insurance companies and they know that if they sever the relationship, they are free to do whatever they want, they don’t have to be accountable to the disability company, they don’t have to worry that any moment the disability company could decide to deny their benefits.

There are 71 opinions so far. Add your comment now.

James:

My LTD plan is an ERISA plan. There is a 2 year clause “own occupation” then that states “any gainful occupation”. What does this mean?

Jim:

Do you have to wait for the insurance co to offer a buy out or can a buy out be requested prior to the two year clause in the LTD policy?

Attorney Greg Dell:

Jim, you need to see if your disability policy defines “any gainful occupation”. Most disability insurance policies will define “any gainful occupation” in the policy.

Attorney Greg Dell:

Jim, most insurance companies will not offer a buyout if you have a policy that will change from “own occupation” to “any occupation”. You do not have to wait two years to request a buyout, but you should be aware that disability insurance companies are not required to offer a lump-sum buyout.

Rose:

Yes I am on disability and an insurance company offered by my former employer approved me for long term disability insurance. Now that my two years are up, the social security approved my lump sum and my payments. The problem is that I was so much in debt for not working for almost three years, I owed alot of money and I spent all of the lump sum that I was to pay back the insurance company. What will happen now, will they garnish my social security check and my kids too?

Attorney Greg Dell:

Rose,

The disability insurance company cannot garnish your social security disability check. They can stop paying you any further benefits and attempt to sue you to recover the overpayment.

Donna:

I was receiving LTD payments for 22 months when the company (MetLife) sent me a letter denying my claim because I “failed to participate or cooperate with vocational rehab”. I was in an online program to advance my degree so I could find work as an RN that didn’t require 12 hour shifts and lifting, since I herniated a disc at my last job. I WAS participating and had completed 2 terms when they denied me because I hadn’t completed the program (40 units/18-24 month program) in 12 months. When I signed a contract for 12 months to be re evaluated as needed, I thought I needed 20 units… not 40!
I have filed an appeal. Do I stand a chance? I cannot work as a nurse with my disability… they know this. I am hopeful they will re-open my case and I can get a lump sum and be done with them. Is this even possible? I am 55, my policy says they will pay until I am 65 if I cannot find employment paying 60% of my pre-injury wage.

Attorney Greg Dell:

Donna:

The rehabilitation clause in the MetLife disability policy is often a trap. You should contact us for a free consultation to discuss your appeal. If you lose your appeal, then you may be able to obtain a lump-sum buyout through the filing of a lawsuit against MetLife.

Clarence Jones:

Unum offered me a buy-out. My benefits will stop in 2018. If i take buy-out will it affect my SSI disability payments? Should I take taxes out now, or wait until next year’s taxes?

Attorney Greg Dell:

Clarence,

Most buyouts have no affect on SSDI payments. You mentioned SSI payment and I don’t know if a buyout will jeopardize your SSI payments. You should ask the SSI administration for an opinion so that you don’t have any problems. You are required by law to pay taxes during the year in which you receive the money. Contact us if you would like any assistance with your Unum buyout offer.

Ginger:

If a person were to take a buyout, I’m assuming it would all come at once, thus “lump-sum”. If 2, 3, or 5 years from now a person’s condition improved to the point that they could go back to work, would they have to pay any money back?

Attorney Greg Dell:

Ginger,

Great question. Once a claimant accepts a lump-sum buyout they sign a release and surrender the disability coverage. The claimant could technically start working the next day without any penalty or obligation to repay any funds. The claimant no longer has any disability coverage under the policy that has been bought out for a lump-sum.

Karen:

My doctor’s office made a mistake on an APS. MetLife terminated my LTD saying I could go back to work. The doctor’s office called them to report the error and wrote an appeal letter for me. Is that good enough or what do I do now?

Attorney Greg Dell:

Karen,

With the limited information you have provided, it is very hard to answer your question. I can tell you that the ERISA appeals we submit are far more extensive than the actions you have taken. If you call us, then we can discuss your options.

Regina Moore:

I was just approved for disability through my hearing with ALJ. I know I will be getting retroactive pay. I am with Reliance Standard/Advocator Group and I was wondering if you have any advice as to applying for hardship or do I call them to see if they will want a lump-sum buyout? I also was wondering if the check would be sent directly to me or them for the retroactive pay? I am not for sure if I understand the difference in backpay vs. retroactive pay.

Attorney Greg Dell:

Regina,

Any payment from SSDI for approved benefits will be sent to you. If you have an overpayment from Reliance, then you are required to send the SSDI funds you receive back to Reliance for the amount of the overpayment, if any.

Tom:

Can you request a LTD (Erisa Covered) buy out from your LTD carrier? I have been on LTD for two years and was recently awarded SSDI but the games that the LTD carrier plays is exhausting and stressfull to my condition.

Attorney Stephen Jessup:

Tom,

First and foremost, it depends on the insurance carrier. Some carriers do not offer buyouts at all. For the ones that do, each case is reviewed individually using various criteria, and in some cases the carrier may determine that you are not a candidate for a buyout. Please do not hesitate to contact our office if you would like a free consultation with one of the disability attorneys as to how we may be able to assist you.

Patricia:

I was wondering if I don’t take the lump-sum offer from my LTD carrier, can they turn around one day and still cancel my claim? I have been on claim for 10 years and the policy is own occupation.

I’m unsure about taking the offer… with interest rates as low as they are I could easily run out of funds before I die. My benefits are payable for life.

Edward Soucek:

My LTD carrier MetLife did an account audit last January 2012 finally this August 2013 they tell me that I owe them 20 months of back offset at $327.00 due to me collecting my company pension. The amount due is a sum of $6,500. in which I can`t pay, because I’m in the middle of a chapter 7 case. Can this situation be corrected by letting MetLife take double of the offset from the 1318.00 being paid to me instead of the lump sum? I would pay $654.00 and then receive $664.00 for 20 months.

Attorney Stephen Jessup:

Edward,

I think there is a strong chance that they will agree to this arrangement. I would recommend that you put the request in writing.

Roberto:

Mr. Greg,

My wife suffers from Multiple Sclerosis (MS); her LTD benefits were granted a couple of months ago. She will get monthly payments of $5000.00 for the next 157 months. Is it too soon to contact our insurance company (The Standard) to ask for a Lump Sum buyout on the policy?

I have been watching your very informative videos. Thank you so much.

Roberto.

Attorney Stephen Jessup:

Roberto,

Most insurance companies will require at a minimum two years of being on claim before they will entertain a lump sum buyout of a policy. This is due in part to waiting to see if the disability continues into any “Any Occupation” period, the receipt of SSDI benefits and other factors.

Evelyn:

What benefits do you lose when you take a settlement from LTD & you’re on SSD?

Attorney Stephen Jessup:

Evelyn,

You lose any future rights under the LTD policy, and possibly any other ancillary benefits you received on account of being on LTD (health insurance, life insurance, etc).

Evelyn:

Thank you, does taking a lump sum from LTD affect your SSD in any way? Do you have to report a settlement from LTD to SSD?

Attorney Stephen Jessup:

Evelyn,

If your LTD benefit is taxable income, chances are the SSA will become aware of it and seek clarification. For additional inquiries as to how the SSA will review the information please consult with a Social Security Attorney.

Kristina:

I just switched doctors and informed my LTD company about it, they in turn sent me new forms for the doctor to fill out and paper work for me to fill out. But the last page in my papers is a form for me to sign similar to agreeing to LTD that they may pull my medical file, credit report/history, financial institution papers and so forth. Are they really allowed if I sign to pull my credit report/history and all my financial institution papers?

It just feels wrong for some reason.

Attorney Stephen Jessup:

Kristina,

We often limit the scope of the authorizations, with specific attention to the provisions regarding financial information. If you do black it out on the authorization make it clear to the carrier that you will provide any needed information as it relates to financial information necessary for the review of your ongoing claim for benefits.

Donna:

My husband has been on LTD (The Hartford) since December of 2007. In January of 2010, he was approved for SSD. In September the LTD company sent requests for more updated medical. Long story short, they said that my husbands primary care doctor’s paperwork made it look like he could work part time. He is sicker and more disabled now than he was when he first went out on LTD. 2 weeks ago, his PCP did his annual, new blood work and not only filled out the paperwork again clarify the severity of my husband’s disabilities and the permanence of them but also sent a letter cementing those facts as well as his extensive list of medications he is on. I spoke to the LTD company last week and the analyst handling his claim said she has sent his Medical info to (Clinical) and she has no clue what the end result is going to be.

If they cut my husbands LTD, we could very well end up homeless. All this stress of waiting and worrying is really messing with my husbands INR and health.

There is more than ample proof of my husbands permanent disability. If they stop his payments, do we have any recourse?

Attorney Stephen Jessup:

Donna,

Long term disability benefits are unfortunately never guaranteed, so there is nothing that would constitute “ample proof of permanent disability.” If Hartford were to cut the benefit your husband would have to undergo an administrative appeal process. Please feel free to contact our office to discuss how we may be able to assist you.

Paul:

Hello, I have been on LTDP with Metlife since 2002, does MetLife offer buyouts to its poliy holders? Thanks.

Attorney Stephen Jessup:

Paul,

MetLife does not currently negotiate buyouts of uncontested claims.

Doug:

Hello,

I am on LTD with the Hartford, and have gotten married since receiving LTD. Does that affect my LTD payments from the Hartford?

Thanks.

Attorney Stephen Jessup:

Doug,

It shouldn’t. Typically your benefit is based on a certain percentage of your pre-disability earnings; as such a change in marital status will not affect that.

Melissa Elkins:

I was hurt at work and diagnosed with RSD, I have Long Term Disabilty I carried through the Company and I have been on SS Disability since 2008, I have RSD in my whole body now and I am getting ready to undergo surgery #16. My insurance is thru Liberty Mutural, do they do buyouts? I now recieve monthly payments, but would consider a buyout from Long Term.

Attorney Stephen Jessup:

Melissa,

Liberty Mutual is not known for offering lump sum buyouts on uncontested claims. However, that is not to say they would not consider the possibility. Please feel free to contact our office to discuss how we may be able to assist you.

Terry:

Hello I have been on LTD from Aetna since July 2013 for Mental Disorders. I only have 24 months, can I do a buyout?

Attorney Stephen Jessup:

Terry,

Aetna will more than likely not offer any buyout due to the fact your claim is limited by a 24 month benefit limitation provision.

Tom:

I am on LTD. I get $5,000 a month. I have been on it for 2.5 years and have 5 years left until the claims end. I will be 65 years old. They offered me a settlement of 1 year ($60,000). Is this a fair settlement?

Attorney Stephen Jessup:

Tom,

One year of benefits when you have a possible five years’ worth of benefits does not seem like a fair settlement amount. Please feel free to contact our office to review and discuss the buyout offer and how we may be able to assist in securing more.

Russ:

I have been on a Hartford ERISA policy since May 2009. Also receiving SSDI since same time. Hartford pays me a bout $5200/month. There are 123months left on the policy equal to about $680,000 total. I am totally disabled from any occ per SSD. I will never return to work but I could live well into my 70’s who knows.

Anyway, prior adjuster was very nice and verbally said they might consider a lump sum. She claimed they had a dept for this and they need more info which I supplied together with my doc. They wrote back they I continued to meet def of disability under policy. I hadn’t heard anything so wrote a letter to see if I could get it started. Suggested IRS discount rate of 2.2% to get ball rolling. New adjuster called and lm for me to return his call to discuss. When I called back he just said Hartford doesn’t offer lump sum. Should I do anything further? Would like lump sum but don’t want to give benefits away.

Attorney Stephen Jessup:

Russ,

Hartford does consider lump sum buyouts, but only on a case by case basis. Please give our office a call so we can discuss your situation further and see how we may be able to assist you in securing a fair buyout.

Josephine:

Does Guardian offer buyouts? Also, is there any risk in asking for a buyout (UNUM) as far as increasing surveillance or other techniques of theirs?

Attorney Stephen Jessup:

Josephine,

Each company evaluates claims for buy outs on a case by case basis. Please feel free to contact our office to discuss how we may be able to assist you in securing a buyout.

Greg:

Hello,

In a previous reply above you stated that MetLife does not offer a Lump Sum on a LTD policy.

I heard from another attorney today that MetLife does offer Lump Sum payouts. I explained to the attorney that I saw on your website that MetLife does not.

Mine is an ERISA policy that I have been on for over 4 years now. He insisted that they do offer Lump Sum. I am confused.

Attorney Stephen Jessup:

Greg,

In our experience, MetLife does not negotiate lump sum buyouts of ERISA LTD policies when the claim is not being contested (denied/litigated). By all means inquire of the other attorney as to his experience in negotiating them.

Cara:

My husband has been on long term disability for over 2 years (Unum) and now considering asking them for a lump sum buyout. Will this affect his pension and health benefits, since he is still considered employed? He still receives his health coverage through his group plan which is important and necessary. Thanks.

Attorney Stephen Jessup:

Cara,

Unum would not be responsible for, nor would they most likely be able to advise you at all regarding the status of pension, health benefits or any other ancillary benefit provided by the employer. You will need to consult with HR as to what would happen with same. Furthermore, Unum will not typically negotiate any lump sum buyout until there has been a SSDI determination (with any applicable overpayment satisfied) and a transition from the “Own Occupation” to “Any Occupation” standard of disability.

Cara:

Thanks Attorney Jessup,

Just a few more comments, he is receiving his SSDI. Unum started this process about 2-3 months after he was approved for the long term disability. At which time, once he receieved his lump sum from SS, we had to reimburse Unum. So I guess I need to contact his HR about health benefits and pension.

Attorney Stephen Jessup:

Cara,

Definitely contact HR. If there will be no issue as it relates to the aforementioned benefits please feel free to contact our office to discuss how we could assist in securing a buyout of your husband’s claim.

John:

I was injured at work in August of 2008. WC covered for a while, but when I failed to improve any they dropped me (quite a mess of screw ups). LTD then picked up until now (May 2014). I have had failed attempts to get on SSD and at this point LTD is once again requesting another try at SSD, or the option of taking a lump sum. I had been receiving 1606.00 per month from LTD. I had 2 dependents under 18 at the time I was injured (19 and 23 now), and the LTD lump sum I am told will be 75,000. I will be 49 this year. Another family member received a similar offer from their LTD while they already had SSD and I have heard that they received close to 5 years worth of funds from LTD (at the same pay rate, but they are 8 years my senior, with no dependents). Is 75,000 a fair amount (3.89 years)? Am I able to continue on with applying for SSD after I take the lump sum?

Sherry:

I have looked all through these comments and now I am confused as to whether or not MetLife offers lump sum buyouts? I have another 20 years of benefits which will take me until I am 65. I have been on LTD for 3 1/2 years already and I’m also on SSDI and I’m in the special handling unit due to the fact that it has been deemed unlikely that I can ever work again. I’m interested in a buyout and I’m curious to see if you think that MetLife would work with me to do a lump sum buyout. Thank you, Sherry.

Attorney Stephen Jessup:

John,

Please feel free to contact our office to discuss the buyout offer further. With respect to you last question, yes, if you do accept a lump sum buyout with your LTD carrier you are still able to pursue for SSDI benefits.

Attorney Stephen Jessup:

Sherry,

In our experience, MetLife does not negotiate lump sum buyouts of policies on uncontested claims.

Kim:

I became disabled June 2013. I qualified for short term disability which turned into long term disability, took Lincoln life 3 months to approve that. Now they have called me and have offered me a lump sum payment that would take it up to December 2015 when my ltd would end. I’m now waiting for a answer for Ssd for approval or denial. My question is will I have to pay anything back to the ltd if I take this lump sum? If so why if it was supposedly based off 60% of my income and now being told that I may have to pay back overpayment? How could any of this be if ltd that was given to me was based off the income I was earning when becoming disabled? Is it worth taking the lump sum? Or just taking the monthly payments, because I’m afraid If I say no that they will find a reason to cancel my LTD. I’m just confused on how any of this works or how it will affect me in the long run knowing that I will have to live on a fixed income for the rest of my life.

Attorney Stephen Jessup:

Kim,

If they waive their right to overpayment for SSDI as part of the settlement then you would not be obligated to repay them any money received from the SSA. Please feel free to contact our office to discuss the offer before you potentially waive legal rights you have under the policy.

Anonymous:

Greetings!

I have been on LTD (ERISA) since 1992 and was receiving about $1000/month. Small amount. Ins. Co. cancelled my payments in 2012 and 2nd appeal has just been denied. I am considering filing a lawsuit as I am unable to work, but am SO poor and now cannot afford medical treatment that I need.

Have been told by a lawyer that it can take THREE(!) years! Can this be so? I am currently 57 years old. I am incapable of working, but hate their tactics and their constant harassment of me, my doctors, etc. The stress of all of this is causing of course lack of sleep, anxiety, headaches, in addition to painful physical challenges (I use a wheelchair etc.).

I understand that everything had to be submitted in the appeals process. If I file suit will the harassment continue?

My main question:
Can they continue to surveil me, or is the harassment hopefully done? I rarely leave my home, but when I do I am paranoid.

Thank you so very much.

Attorney Stephen Jessup:

Anon,

Unfortunately, litigation of ERISA disability cases can take several years before there is a resolution in the courts. However, the case could be resolved in advance of an actual trial date by way of lump sum settlement at mediation. For purposes of litigation under an ERISA governed disability policy, after a final denial of benefits is rendered by an insurance company the administrative record (which a judge will limit review to for purposes of trial) closes and no new information can be added to the record by you or the insurance company. As such, I would not expect your insurance company to conduct any additional surveillance.

Please feel free to contact our office to discuss how we may be able to assist you in filing a lawsuit on your behalf.

Jerry:

My wife and I currently have a long term group policy through her former employer. The employer has decided to stop paying premiums on the policy now and everyone retired has the option of converting the policy to an individual policy and paying much higher premiums or doing a buyout on the 14 year old policy. The policy is only paid up if it has been in force 30 years and the person is over age 65. We do not wish to pay monthly premiums as they will rise about 450% per month over current premiums and continue until death or until the policy is used. The buyout amount will be up to $50,000. I’ve looked at the premium limits on Schedule A if we itemize and include the premiums as a medical expense subject to the 7.5% exclusion amount. But is there any provision for an amount higher than the yearly limit for a buyout?

Attorney Stephen Jessup:

Jerry,

We would need to see a copy of the documentation in order to determine what your rights may be with respect to a buyout. Please feel free to contact our office to discuss.

Priscilla B.:

I have been receiving LTD (ERISA) with Liberty Mutual since 2012. Would I qualify for a lump-sum buyout? Thank you.

Emily:

On MetLife LTD since 2011, falling under can’t be gainfully employed. Vocationally rehab said nothing she can do for me. If I ever want to try give her call… Also on SSDI, have 20 more years. Could a buyout be possible?

Attorney Stephen Jessup:

Emily,

Unfortunately, MetLife has not shown interest in lump sum settlements under ERISA governed policies.

Attorney Stephen Jessup:

Priscilla,

Possibly. Liberty mutual reviews claims for buy outs on a very limited basis. Please feel free to contact our office to discuss how we may be able to assist you.

Disabled in FL:

I have a blood clotting disorder that prevents me from working. I am currently receiving partial pmts from UNUM, due to my SSD payments. I paid the difference back in 2012, when I started rec. my soc. sec. disability. It will be three years since I have had SSD and a little over 3 years of LTD. Unum rep told me I would be paid until age 62. I am now about to turn 56 in Sept. Can I ask them for a lump sum payment? Thanks so much.

Attorney Stephen Jessup:

Disabled,

Unum will discuss lump sum settlements of policies on a case by case basis. Also, a typical Unum disability policy provides benefits to the age of 65, so you may have potentially been misinformed by the Unum representative. Please feel free to contact our office to discuss how we may be able to assist you in securing a lump sum buyout of your policy.

John:

So, CIGNA called and offered a lump sum settlement. First, I think it was low. According to what I have read and my calculations, it appears to be at about 9% vs what I have read is typical at 3-4.5%. They said they would send the offer letter out right away. I was told this three times, three different phone calls over the course of a month. but received nothing. They also wanted me to try to apply to SS again, but then told me because my appeal was denied (a year ago) I was done with that process. Another rep from CIGNA started calling requesting medical records. I had to make an appointment in order to get those released. In the meantime, they apparently parked a PI outside who in the four days he was here only saw me drive to a restaurant a mile away and sit with my wife for under 30 minutes, then return home. CIGNA was sent the medical records. By now at least 3 months had passed since the lump sum offer. The paperwork sent from the Dr states: sitting less than 30 minutes, standing less than 30 minutes, walking less than 30 minutes… basically I need to transition very frequently to control pain and stiffness. It is also noted no lifting over 5 pounds. The main issue is my knees, but also chronic pain syndrome and a lot of other related things. Because the recent MRIs “only” indicated thinning and inflammation (defects are present but I guess didn’t indicate without dye? Some real mechanical issues), because I was seen at a restaurant where they claim I sat for 50 minutes when we have proof it was less than 30 (I was told 50 minutes on the phone), and because they say my Dr. says I can sit for 30 minutes (which the Dr. actually says less than), and apparently in my small little VERY remote town where the nearest stop light is over 60 miles way, there is some great job that they claim exists but won’t tell me where, that is sedentary (nothing says I can sit for 40 hours a week!), they denied my continued coverage or the lump sum settlement. It gets even more messed up… CIGNA wrote the termination of benefits letter on the 19th, and called me to tell me first thing in the morning on the 20th. But on the 19th my Dr. received a letter from CIGNA requesting clarification on my restrictions and why I could’t perform a sedentary job. My Dr was unable to reply to this request until the 22nd. So it appears that CIGNA jumped the gun in terminating my coverage? I think it would be different if I had been the one who decided I needed to try to get clarification to CIGNA on the 19th or 20th, but it was CIGNA who requested it but on the same day terminated my coverage. This whole thing seems like very shady practice. Now I must appeal I guess, but also wonder what right I may have to simply call them and demand they make the policy whole again seeing how they requested information and didn’t even allow time to receive it.

Attorney Stephen Jessup:

John,

Please feel free to contact our office to discuss your case. Cigna is not known for retaliatory actions following lump sum settlement discussions, so I would have to agree that there is something going on beyond not receiving a response from your doctor.

Bill:

I am currently receiving SSDI and my former employer is offering a lump sum payout. Will this effect my SSDI payments?

Attorney Stephen Jessup:

Bill,

Based on the nature of the payout it could. I would recommend you contact a Social Security attorney to determine your rights and/or liabilities.

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