Disability Insurance Settlements and Commutations
As a medical professional that has become eligible to receive benefits under your long-term disability policy, you may be wondering if accepting a lump sum payment is in your best interest. While an experienced long-term disability attorney is in the best position to advise you on how to proceed, the following information will prove useful as you explore your options.
What is a Long-Term Disability Lump Sum Settlement or Commutation?
A lump sum settlement — also referred to as a buyout or negotiated settlement — is the amount of money the claimant and the insurance company agree that the insurance company will pay to settle a disputed claim. A commutation is a lump sum offered by the insurer, including future benefits, to close an already approved claim. In either case, if the claimant accepts the buyout amount, they generally cannot later try to extract further payments from the insurance company. These agreements are final and typically involve a return or surrender of the disability insurance policy.
Why Would the Insurance Company Want to Offer a Lump Sum Long-Term Disability Policy Payment or Commutation?
Insurance companies hate making payments. That’s a fact. When your insurance company sold your disability insurance policy, it was done with the hope that you would never file a claim and continuously pay premiums. When you meet the requirements for benefit eligibility, the insurance company accepts liability for monthly payments as long as you remain eligible throughout the maximum benefit period, and this can be costly. The insurer hopes that, by offering a lump sum payment, they can entice the claimant to accept less than the total policy amount would have cost them into the future.
Does Every Long-Term Disability Insurance Policy Allow for a Commutation?
There is no requirement that disability insurers offer a lump sum payment, but some do when it makes financial sense for the company. It is often difficult to determine what is a reasonable, accurate lump sum offer. Since Seltzer & Associates is a national firm whose attorneys work with all the major disability insurance companies and third-party administrators, we can often offer insights regarding the best options available to you under your policy.
How the Insurance Company Calculates the Lump Sum Amount
Insurance companies employ teams of experts — economists, accountants, actuaries — to determine the value of a claim and policy. They spend much time and effort figuring out what it is going to cost them to pay benefits over time versus the savings from offering a single payment. While every insurer has its own methodology for making these calculations, they usually look at:
- The age of the claimant
- The maximum potential benefit period
- The life expectancy of the insured
- The present value of future monthly disability payments
- Other financial indicators or measures
Contact a Philadelphia Disability Insurance Lawyer Today
The attorneys at Seltzer & Associates work with doctors and other medical professionals across the country who are seeking solutions to their long-term disability benefits issues, including whether to pursue and accept a settlement or commutation. Our goal is to make sure you receive the best possible offer, while also making sure you understand the totality of the circumstances to help you make a the right decision for you and your family. Contact one of our long-term disability lawyers today to ensure you receive all the disability benefits you are entitled to. Call us at 888-699-4222.