If you’re a Prudential long term disability insurance claimant who has been on claim for a month or two, you may be interested in getting a lump sum buyout of your insurance policy. But although Prudential does offer this as an option for many claimants, it’s never obligated to buy out disability claimants – and when it comes to your lump-sum disability buyout options, proper timing is everything. Learn more about when, why, and how Prudential makes buyout offers to long term disability claimants.
Prudential is not required to offer a lump sum disability buyout.
Even after you’ve been approved for long term disability benefits, you’re not home free. Prudential and other disability insurance carriers evaluate claims on a month-to-month basis, which means that just because you’re eligible for claims in October doesn’t mean you’ll remain eligible in November or December if your situation changes.
Because insurance carriers reserve the right to re-evaluate a disability claim each month, it can take a while for Prudential to want to engage in buyout negotiations. This is especially true if the claimant’s disability is one that is either terminal or temporary, as either option reduces the insurance carrier’s odds of having to pay benefits for years on end.
It is important to understand that lump sum buyouts are always based on the present value of all your future benefits.
When Prudential offers a lump sum buyout, it will calculate its settlement offer by considering the benefits that have already been paid, the benefits that are likely to be paid in the future (discounted to their present value), and the likelihood that Prudential can terminate these future benefits.
For example, group or ERISA policies generally change the definition of “disability” at the 24-month mark, making it difficult for claimants to continue to qualify for benefits after receiving them for two years. Therefore, if an ERISA claimant is at month 20 of their claim, it’s unlikely that the insurance company is going to offer more than the value of a few months of benefits. On the other hand, a claimant who is likely to continue to qualify for disability benefits for the foreseeable future is likely to receive a much more generous buyout offer.
A buyout is not always best for everyone and we are happy to provide a free consultation to discuss all of your options.
Buyouts come with some distinct benefits and drawbacks. For claimants who have been struggling to pay the bills while receiving disability benefits, getting a large lump sum can seem like winning the lottery. Having immediate access to these funds can remove a lot of economic turbulence; and because continued benefits are never guaranteed when the claim is re-evaluated on a monthly basis, taking a lump sum settlement can remove a claimant’s uncertainty that a claim will be abruptly denied.
But those who accept a buyout offer are also giving up some important rights. Once you accept a buyout, you’re no longer able to pursue additional disability benefits from your insurance carrier – in fact, your policy will usually be canceled. This can mean giving up potentially thousands of dollars in benefits over the long term.
Because of these competing interests, it’s important for long term disability claimants to consult with an attorney before accepting or rejecting a buyout offer. At Dell & Schaefer, our legal team has extensive experience in handling Prudential long term disability buyouts, and we can evaluate the specifics of your claim to see whether a buyout is your best option. Just give us a call today to speak with one of our experienced disability insurance attorneys.