Insurance Lump Sum Buyouts
The lawyers at Disability Insurance Law Group have represented countless clients in the negotiation of lump sum buyouts of their insurance policies. Our experience with almost every major insurance company in such negotiations provides us with the skills necessary to vigorously assert our clients’ rights and to understand how insurance companies assess the value of each claim. We are dedicated to maximizing the buyout price of our clients’ policies.
How Insurance Companies Operate
The insurance business is a risk shifting industry. Policyholders buy insurance contracts and pay premiums to protect themselves and their families in the event of a loss. Insurance companies sell contracts and collect premiums, with the hope that a claim will never be made or there will be a reason that a claim will not have to be paid out. Both parties are taking a risk. Once an insurance company is forced to provide benefits under a policy, the insurance company is losing profit.
If a claim is prepared effectively, causing the insurance company to contemplate the long-term payment under the policy, often insurance companies will be interested in buying out the policy for a single lump-sum amount in order to cut its losses. Moreover, during intense claim investigations, often the insurance company will entertain a global settlement of the claim in order to avoid the expense of litigation after a denial of payment or a delay in rendering a determination. Sometimes insurance companies will approach claimants with an offer. Other times, claimants wish to approach their insurance companies to obtain a buyout of their policies.
How a Disability Insurance Law Group Attorney Can Help
The attorneys at DI Law Group have represented countless clients in lump sum settlement negotiations with their insurance carriers. We collaborate with actuaries, financial consultants, medical experts and treating physicians to prepare and present our clients’ claims to the insurance companies. We work diligently and aggressively in an effort to negotiate for our clients the maximum buyout price for their policies.
Insurance companies have their own formulas for assessing the value of an insured’s insurance policy and claim. As such, it is essential that if you are considering a buyout of your insurance policy/claim, you choose an attorney who has experience in the process and understands the formula and factors that your insurance carrier is utilizing to determine the value of your claim. The attorneys at DI Law Group have negotiated buyouts with most major insurance companies. Our experience helps us to understand their valuation methodology.
Buyout Valuation Considerations
There are multiple factors involved in an insurance company’s assessment of the value of an insurance policy and claim. These factors include, but are not limited to:
- Life expectancy
- Current corporate bond and interest rate
- The expected duration of the insurance claim
- The policy terms and definitions of coverage
- The duration of the policy
- The amount that the insurance company reserves for the policy
- Cost of living increases, if provided for in the policy
- The present value of future benefits under the policy
Present Versus Future Values of Settlements
Insurance companies will typically offer a lump sum settlement based upon an amount that is discounted to present value dollars. Essentially, the present value is the amount of money an insurance company must pay today to purchase a corporate bond or annuity that will accrue over the duration of the policy into the total amount of future benefits at current interest rates. For this reason, the present value of the policy is always less than the actual future value.
An insurance company will typically not buyout a policy for the full amount of present value, as there is no financial incentive to do so. However, by presenting the factors listed above, we negotiate with insurance companies in an effort to maximize the strengths of our client’s claim and the buyout value of the policy. Our clients are always free to accept or deny any offer made by their insurance company, and we work closely with our clients to determine if an offer makes sense for them and their families.
Learn More About Lump Sum Settlements
If you are engaged in a claims process or dispute regarding disability insurance benefits, long-term care insurance or life insurance, and have questions regarding a lump sum or one-time buyout, we may be able to help.
We encourage you to contact our office for a free consultation if you are interested in pursuing a lump sum buyout of your claim or if you have been approached by your insurance company for a buyout. The attorneys at DI Law Group are dedicated to making every effort to maximize our clients’ buyout price and work closely with actuaries, financial consultants, medical experts and treating physicians to meet this goal.
View an article written by one of our attorneys, Alicia Paulino-Grisham, discussing a lump sum buyout of her client’s policy.