Has a long-term disability insurer offered a lump-sum buyout?

Once your long-term disability (LTD) claim is approved and stabilized, the insurer may offer you a lump-sum buyout. You could obtain a considerable sum in exchange for ending your claim once and for all.

A final lump-sum payment sounds great on paper, but it is critical to weigh the risks and rewards before you agree to accept the offer. Let’s look at these buyouts.

What are the advantages of a lump-sum buyout?

The funds you obtain through this payment method are typically tax-free, which means you get the money free and clear. You can do whatever you like with it, such as seeking education, making investments or buying a new home with disability accommodations.

More possible benefits include the following:

• It removes the risk of a claim termination.
• It ends the hassle of dealing with disability insurers.
• It helps provide immediate financial security for your family.

Finally, should your disability improve after all, you can return to work without worrying about it affecting your claim.

What drawbacks should you consider?

Perhaps the most detrimental downside of taking a lump-sum payment is that you probably will not receive the full value of your claim. Long-term disability insurers do not make deals that favor the insured over the company.

Other potential disadvantages:

• Loss of steady monthly payments
• No option to reopen or resume your claim
• Overspending can deplete your lump-sum rapidly

Another disadvantage is the possibility of those still undergoing treatment having to cover disability-related expenses out-of-pocket.

Any actions that could impact long-term disability insurance claims in Colorado require careful forethought and planning, including lump-sum buyouts. Reaching out for legal guidance can only improve your disability claim experience.