WHAT YOU SHOULD CONSIDER
BEFORE TAKING A BUYOUT
April 18, 2022
Disability insurance provides income or financial assistance to disabled or incapacitated policyholders – employees and business owners – who are unable to work. Depending on the policy’s terms, your health condition, and other factors, your insurer may offer you a lump-sum payment to buy out your remaining future disability benefits.
However, accepting a buyout automatically stops you from receiving monthly payments. Hence, before accepting the insurance company’s settlement offer, there are several things to consider. An experienced Arizona disability insurance claims attorney can enlighten you about the factors to consider before taking a lump-sum buyout and help you review the terms of the settlement proposal.
At Arnett & Arnett, PC, we have the experience and resources to guide, advise, and represent clients in all phases of disability insurance claims. Our reliable attorneys are available to discuss your unique circumstances and enlighten you about the benefits and drawbacks of taking a disability insurance buyout, as well as the factors to consider before accepting it. We proudly serve clients across Chandler, Phoenix, Tucson, Flagstaff, and throughout Arizona.
Benefits of a Disability Insurance Buyout
A lump-sum disability insurance buyout is a settlement offer by an insurance provider to buy out the remaining future disability benefits of a policyholder. This involves offering the policyholder a considerably huge amount of money upfront in exchange for monthly payments on their insurance policy. Here are some benefits of accepting a disability insurance buyout:
It helps you avoid the potential termination of claims.
You can invest the lump-sum settlement payment for a higher rate of return which will benefit you and your family members.
It helps you avoid the need for routine medical record validation.
You don’t have to worry about the devious surveillance tactics of the disability insurance company any longer.
The lump-sum settlement payment can become a part of your estate or trust assets.
Potential Downfalls of a Disability Insurance Buyout
While accepting a disability insurance buyout can be beneficial, there are some drawbacks. Here are some potential downfalls of accepting a disability insurance buyout:
You will receive a lump-sum payment that is lower than the actual value of your disability insurance claims.
You will no longer be eligible to receive monthly payments.
If you lack financial discipline, you may waste the lump-sum payment.
You will lose future benefits on your disability insurance policy.
You may outlive the money.
Accepting a lump-sum settlement payment has negative tax implications.
A knowledgeable Arizona disability insurance claims attorney can evaluate your unique situation and help you understand the factors to consider before accepting a lump-sum settlement payment.
Other Factors to Consider
Some other factors to consider before accepting a disability insurance buyout include:
Amount of Time Left on Your Claim
Usually, the longer the time you have left on the disability insurance claim, the lower the buyout the insurer will offer you. Hence, when offered a lump-sum payment, you should consider the time remaining on your claims, your age, and your possibility of recovery or early death.
Your Life Expectancy
Your life expectancy can affect the amount of money the insurer will offer you. Oftentimes, insurance companies won’t be willing to offer a buyout to a policyholder with a short life expectancy or terminal illness. However, if your family has a history of longevity and your policy offers lifetime payouts, you should consider continuing under your policy.
Likelihood of Remaining Disabled
If you’re permanently disabled and you may not recover enough to live a near-normal life, then a buyout could be in your best interests.
Your Medical Debts
Some disability conditions are often cost-intensive. If you’re still receiving treatment, you may need funds to settle co-pays, deductibles, as well as other uncovered medical bills. In a situation like this, a lump-sum buyout can provide you with the immediate funds you need to settle medical debts.
Your Sources of Income
When you accept a lump-sum settlement payment, you won’t receive monthly payments. Hence, if your disability insurance benefits are your primary or only source of income, you should only accept a lump-sum buyout that will be considered enough to cover your financial needs for the rest of your life.
Accepting a lump-sum settlement payment allows you to invest the money for a higher rate of return. If there are available risk-free investment opportunities that can yield higher returns, taking a buyout may be a great option. However, if you’re investing in the stock market, you should consider the current interest rates.
Essentially, an insurance provider will only offer you a lump-sum settlement payment in order to save money. If you’ve been offered a buyout by your disability insurance carrier, it is important that you reach out to an experienced attorney before you accept it. Your disability insurance claims attorney can review the insurance company’s offer and help negotiate an improved offer that is in your best interests.
Getting the Skilled Legal Guidance You Need
Depending on your personal situation, accepting a disability insurance buyout can be beneficial. You can use the lump-sum payout to settle your debts or invest in your retirement savings. Conversely, you will lose your monthly payments, and the insurer will offer you an amount lower than the full value of your disability insurance claims. Therefore, when considering a disability insurance buyout, you need to speak with an experienced disability insurance buyouts attorney for proper guidance and to help you make intelligent decisions.
At Arnett & Arnett, PC, we’re dedicated to offering knowledgeable legal guidance and reliable advocacy to clients in the legal matters of disability insurance buyouts. As your legal counsel, we can evaluate all the details and terms of the insurance provider’s proposal and enlighten you about its long-term implications. Using our adept negotiation skills, our trusted team will help you negotiate a fair settlement offer with the insurance company. Also, we will work diligently to protect your best interests, disability insurance benefits, and future.
Contact Arnett & Arnett, PC today to schedule a simple case assessment with skilled disability insurance claims attorneys. Our dedicated team can offer you the experienced legal counsel, support, and advocacy you need to navigate crucial decisions. We’re proud to serve clients across Chandler, Phoenix, Tucson, Flagstaff, and throughout Arizona.