A disability insurance policy lump sum buyout is where an insurance company pays an individual an agreed upon lump sum amount of money to fully “buyout” the life of an individual’s disability insurance policy and claim. In other words, in exchange for a one-time check for a lump sum amount of money, an individual agrees to return his or her disability insurance policy to the insurance company and release all rights under the policy. After a buyout settlement is negotiated, the individual has no more rights against the insurance company under their disability insurance policy – it is almost as if it never existed. The individual no longer has a disability claim, and no longer receives a disability benefit check on an ongoing basis, but the individual also no longer has an obligation to prove their disability to the insurance company for future payments under the policy. Instead the one-time payment by the insurance company, which is generally only a percentage of the value of the claim after being discounted to present value, is the full and final payment of any future benefits under the disability insurance policy which is now null and void.
An insurance company is motivated to begin by offering you a lower dollar buyout settlement amount of your disability insurance policy and claim than their highest dollar offer. We’ve seen it happen with all of the major disability insurance carriers. Your disability insurance company may do the right thing and offer you their highest dollar offer from the beginning, but how will you know unless you involve a skilled negotiator on your side to test the offer? The insurance company is a business, looking to make a business decision – the company is not an advocate looking out for your best interests. In vigorously negotiating countless buyout settlements with disability insurance companies like Unum, Provident Life, Paul Revere, New England Life, Monarch, Guardian, Berkshire, AXA Equitable, Disability Management Services – otherwise known as DMS, Aetna, Assurant Sun Life, Hartford, MetLife, Cigna, Prudential, Sedgwick, Illinois Mutual, Mass Mutual, Reliance Standard, Trustmark, Standard, Northwestern, Principal, Lincoln Financial, Liberty Mutual, and others, we know that it is very rare that an insurance company starts with the highest amount of money it is willing to offer you for a buyout settlement of your disability insurance claim and policy.
It is important to consult with a professional prior to accepting a buyout offer from an insurance company for many reasons. Once a buyout offer is accepted by you, you have agreed to settle all rights to your claim and policy for the agreed upon amount. Additionally, the initial buyout settlement offer by your carrier is not usually the highest buyout settlement offer that your carrier is willing to offer you to resolve your disability insurance claim and policy. The amount of money that you agree to settle your disability insurance claim and policy for is forever – it is critical that you obtain the highest buyout settlement offer from your insurance company for your consideration. Even if you determine that the company’s highest buyout settlement offer is not high enough for you to agree to a complete settlement of your claims and policy, it is important that you are able to have that information and consider the insurance company’s highest dollar offer.
Additionally, even if a buyout settlement is reached, the negotiation process does not end there. The terms of the settlement and release agreement that your company will require you to agree to and sign are hugely important. The terms of the agreement that are negotiated are also forever, and even extend to your heirs and assigns, and anyone else who can claim rights under you. Just as insurance companies draft the disability insurance policy in a way to serve the company’s own self-interest, companies will present you with a settlement and release agreement filled with legal terms and provisions designed to protect and insulate the insurance company. In fact, there is little to nothing in the initial proposed settlement and release agreement that is included to protect you, the insured who is giving up a significant amount of rights. It is critical that your advocate negotiates properly drafted legal terms and provisions into the agreement that will protect your rights as well. Many settlement and release agreements don’t even include a signature line for the insurance company, and only require you to sign the agreement – however, there are two parties to the agreement, and both parties should be required to sign in the presence of a notary. We’ve negotiated countless settlement and release agreements for our clients which even the playing field, and require not only that the insurance company also sign the agreement, but that also requires mutuality of agreement. We ensure that your confidential information is protected from disclosure, that the insurance company cannot come after you in the future for claims for recovery of an overpayment of benefits, or for claims that they made an error during the claim which caused you to owe them money, or to pursue a lawsuit or claim against you for any benefits that the company previously paid you nor any lump sum settlement amount that was agreed to under the agreement. We ensure that the company doesn’t unfairly penalize you for becoming insured under group insurance plans underwritten by their company in the future, particularly when you had no knowledge of the situation or did not intentionally seek out the insurance coverage. You would be amazed at the provisions included (and not included) within the settlement and release agreement that your insurance company will try to strong arm you into signing once a buyout agreement has been reached.
It is critical that these buyout lump sum settlements be negotiated from beginning to end, to ensure that you are not only presented with the highest buyout settlement offer by your insurance company, but that you are protected each step of the way from the selfish motivations of the insurance company.
We encourage you to contact our firm for a free consultation if you are interested in pursuing a lump sum buyout of your disability insurance claim and policy, or if you have been approached by your insurance company regarding a lump sum settlement. We are dedicated to aggressively pursuing the maximum buyout price that your disability insurance company will offer, and work closely with actuaries, financial consultants, medical experts, and treating physicians to ensure this occurs, as well as ensuring that you are protected to the extent possible in the written agreement.