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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 41 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.

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