What is a Long-Term Disability Buyout? Should I Accept A Disability Buy-Out?

A long-term disability insurance buyout is when the insurance company offers you a lump sum of money now in exchange for never having to pay you again on the policy. Should I accept a long-term disability buyout?

If you are offered a long-term disability buyout, there are a number of things to consider.  Let’s look at an example:

Hank is a 45-year-old surgeon who developed cancer and as a result of his treatment is left with hand tremors and other neuropsychological symptoms.  Hank purchased a long-term disability policy that paid him $20,000 per month (or $240,000 per year) until age 70 provided he remained disabled under the terms of the policy.  Since Hank is 45, the policy can remain in effect for 25 more years with a lifetime payout of $6,000,000. 

Hank’s long-term disability insurance company has offered him a buyout. What should he consider when deciding whether to accept or reject the offer?

Pros vs. Cons of Accepting a Long-Term Disability Buyout

There is never an easy answer to whether to accept the buyout or not.  But, in considering the offer, you should look at the pros and cons of the situation:

PROS

CONS

Finished dealing with LTD Insurer if buyout accepted

Value received is less than the full value of the policy if you were to stay on the policy for the full term

Do not have to look over your shoulder for LTD investigators anymore

Lose monthly payment after acceptance of buyout

Never worry about going to an IME or completing a new form for the LTD claim

May have negative tax implications

Can invest money for benefit of yourself and your family

Don’t get to talk to your LTD case manager anymore

If something happens to you after buyout completed (like death), LTD insurer cannot get money back

You like dealing with the stress of a policy review and will not be able to sleep at night if this does not happen anymore

 

Obviously, each situation is different and you should seek out the information necessary to help you make the best decision in your specific circumstances.

Our team at Louisiana Disability Law is skilled at guiding hard-working, disabled people like you through the long-term disability process.  We can help you effectively evaluate any long-term disability buyout offer and negotiate on your behalf. 

Give us a call today at 985-240-9773 if you received a buyout offer and don’t know where to begin! 

Loyd J. Bourgeois
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Disability and Personal Injury Attorney