Whether you have purchased a long-term disability policy directly from an insurance company or you have coverage under an ERISA-governed policy by your employer, you may reach a point at which the insurance company offers you a lump sum buy-out. Essentially, a buy-out is when an insurance company offers to pay you a one-time lump sum of money in exchange for you giving up all rights under the insurance policy. In other words, once you receive that lump sum, you are no longer entitled to any additional benefits under the policy and the insurance company is no longer obligated to pay any benefits to you.

In some cases, a lump sum buy-out may be beneficial to you. It can provide you with a large sum of money to invest and improve your financial future, particularly if you have another source of household income and you do not need to continually get monthly disability benefits. Taking a lump sum also might be a wise move if your medical condition is terminal; you could use the funds to provide support for your surviving family members. Plus, it may be tempting to simply take the lump sum and no longer have to deal with the insurance company.

In many cases, however, a buy-out is NOT in your best interest. For instance, suppose the insurance company offers you $250,000 in a lump sum buy-out. If you collect benefits for another 20 years, though, you might collect twice or even three times that in monthly disability benefits. Depending on your situation, it might seem more beneficial to opt for the monthly disability benefits rather than take the lump sum buy-out.

While no one can accurately predict the future or your own longevity, you should calculate your estimated benefits over the next several years and compare that figure to the lump sum buy-out figure. If the likelihood is that you will receive far more in monthly benefits than you would from a lump-sum payment, then it may be better to simply receive monthly benefits.

While long-term disability insurance buy-outs may benefit you in some circumstances, it may be more beneficial to you to avoid the buy-out and simply collect your benefits. When you are facing a decision that is as important as whether to take a buy-out, the attorneys at Bonnici Law Group have the skills and knowledge to advise you of all potential options. We know how crucial this support can be to you when you unable to work and we are here to represent your interests throughout any dealings that you must have with your insurance company. For legal advice about your claim, please contact Bonnici Law Group at 858-261-5454 or help@bonnicilawgroup.com.