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Beware of unreasonable Prudential Disability Insurance lump sum buyout offer

Our law firm was recently contacted by an individual that was receiving long term disability income payments from Prudential. This disability claimant has been on long term disability for approximately 12 months. His disability is the result of a disabling knee condition. His Prudential long term disability policy defines “disability” for the first 24 months as the inability to perform the substantial and material duties of his occupation. After 24 months the definition of disability changes to the inability to perform the material duties of any gainful occupation. Gainful occupation is an occupation that will pay at least 60% of the claimants pre-disability earnings. This is known as the “any occupation” definition.

This disability claimant received a letter from Prudential offering a lump sum buyout of his disability policy in exchange for the full surrender of his long term disability policy and the advance payment of an additional 12 months of disability benefits. The claimant advised me that he spoke with someone at Prudential and they said he should take the offer because he will not be eligible for benefits when his definition of disability changes to “any occupation.” This particular claimant is not only having medical problems with his knees, but he is experiencing hip and back problems. I advised this particular claimant that there is a high probability that he will remain eligible for disability income benefits when his definition of disability changes. I also advised that since you have no idea what your medical condition will be in the next 12 months there is simply no reason to take the buyout and give up your policy. “I also advised that is was wrong and misleading for the Prudential representative to persuade the claimant into believing his benefits will end at the end of 24 months”. If this claimant were to accept this unreasonable lump sum buyout offer, he would likely be giving up his rights to over an additional $500,000 of long term disability insurance benefits.

Prudential is one of the top three largest group long term disability insurance companies and this recent buyout offer may be an indication of a new strategy they have implemented in an effort to eliminate their long term disability claim exposure. Lump sum disability buyout offers must be considered with great caution and you must understand all of the terms of your disability policy in order to make the right decision.