Deciding How to Settle Your LTD Claim – Reinstatement or Lump Sum?
Settling Your LTD Claim Once & For All
If you have applied for long-term disability (LTD) benefits but have been denied, or your LTD benefits have been cut off, the battle doesn’t have to end there. There are several options for receiving financial compensation from your insurance company, like appealing their decision, filing a lawsuit, or negotiating a settlement.
Often, an insurance company will push for a lump sum settlement. Although it’s not always the best option as they often result in less than the amount you initially claimed, it is sometimes your only option for receiving financial compensation for the disability you have suffered. Or, you may be interested in exploring a reinstatement settlement to get back the benefits you were rightfully owed but did not receive.
Whichever route you take, it’s essential to understand the differences between these options and what they would mean for your future. You have the right to hire our qualified LTD lawyers to help you understand and make the right choice for the best result for your financial and personal health.
How often do employers settle out of court?
We have seen many disability claims resolved or settled without ever going to trial. By negotiating a settlement and skipping the trial process, you can save time and money, getting financial compensation for the disability you suffered faster so you can move on to focus on your rehabilitation.
What is a Lump Sum Disability Buyout?
A lump sum disability buyout is a single, one-time payment that your insurance company pays you to completely settle your claim and release themselves of any future liability. This means your insurance provider will never pay you any more money for any reason.
With an LTD lump sum settlement, never means never. Even if your disability worsens, extends longer than anticipated, or you develop another disabling condition, the company will no longer be liable for any future claims you want to make after accepting an LTD lump sum settlement.
How Does the Insurance Company Decide Whether or Not to Offer the Lump Sum?
The main reason an insurance company will offer a lump sum settlement is because it is in the best interest of their company, not because it is best for you. The settlement offered by an insurance provider is almost always discounted to save them more money compared to making continuous monthly long-term disability benefit payments.
If your condition is terminal, an insurance provider will likely not be willing to settle your claim. An insurance company may also not be willing to settle until after you begin receiving CPP-D or other forms of LTD benefits so that they can offset the settlement. Your insurer will likely refuse or stall your settlement until they feel it is in their best interest.
What Does “Surrender My Disability Benefits” Mean? – Full & Final Release
If you decide to accept the settlement from your insurance provider, you will be required to sign a settlement claim form, also referred to as a full and final release. Your signature on this form is your declaration that you agree to the settlement amount and promise you will not pursue any further legal action against your insurer and that you “surrender your disability benefits”.
Disadvantages to a Lump Sum Settlement
- Often results in less than you’d receive from monthly LTD payments
- Releases your insurance provider of all future liability
- You will never receive any more money from your insurer
- Ends your involvement with your disability insurance company
- Tax implications of your settlement may be different than the tax implications of monthly LTD benefits
- A large lump sum of money can easily be mismanaged
What is a Reinstatement Settlement?
A reinstatement settlement means that your insurance provider will pay you for some or all of the LTD benefits you were denied, known as arrears, from the date you were denied up-to and including the date of the settlement. Usually, you will also receive compensation for prejudgment interest and legal fees. It does not necessarily mean, however, that your long-term disability benefit payments are reinstated.
After your settlement, your insurance company will reassess your situation and determine whether you will receive future LTD benefits. If so, you will begin receiving monthly payments at a full or reduced amount. If not, your payments could be terminated at any point after your settlement.
Disadvantages to a Reinstatement Settlement
- Can result in reduced future payments
- Doesn’t guarantee you future LTD benefits
- The litigation process can cause mental stress and emotional damage
How to Decide Between a Lump Sum & Reinstatement Settlement
Deciding between a lump sum and reinstatement settlement can be difficult without the help of an experienced LTD lawyer on your side. The right decision depends on every little detail of your situation and your contract with your LTD insurance provider. Without knowing the full scope of your circumstances, it’s impossible to know the best decision. However, if there’s a strong chance you’ll be eligible to receive LTD benefits in the future after a reinstatement settlement, the prolonged benefits are usually more beneficial for a policyholder than receiving a lump sum.
Is it too late to hire an LTD Lawyer?
Due to the limitation periods that exist around LTD claims, we recommend talking to one of our LTD lawyers as soon as possible to help you get the benefits you deserve. Having someone who understands and is used to the tactics insurance providers use to create the best situation for themselves is imperative to negotiating a fair settlement.
Whether you choose an LTD lump sum settlement, reinstatement LTD settlement, file a lawsuit, or even appeal your insurance provider’s decision internally, hiring a qualified LTD lawyer from Valent Legal will give you the best shot getting the best outcome you can get.