Considering a Lump Sum Offer from Long-Term Disability Insurance
Hi everyone,
I’m currently facing a decision about whether to accept or decline a lump sum offer from my long-term disability insurance.
After crunching some numbers, it appears that the lump sum, when taxed, is roughly equivalent to almost nine years’ worth of monthly benefits. I factored in a 35% reduction in the monthly benefit, anticipating that if I refuse the lump sum, I may need to enlist a lawyer to navigate potential efforts by the insurance company to reduce or deny my future benefits. A few years ago, I had to appeal a denial, and at that time, disability lawyers typically charged about 33-40% of the benefits. I opted for a flat fee to assist only with the appeal.
Since I became disabled at 30, I have a long road ahead, and I’m uncertain if I can handle another denial—mentally, emotionally, and financially. The trauma from that experience, compounded by the COVID pandemic, still lingers with me in the form of PTSD. Although I can’t envision returning to the workforce, the lump sum feels like a more secure option. On the other hand, if I reject it, I can’t help but worry about how the insurance company might respond throughout my benefit period to protect their bottom line.
I’m particularly anxious about potential disruptions regarding my SSDI payments. If my SSDI benefits are reduced, the insurance company is supposed to revert to the pre-SSDI payout amount, which is more than double my current benefits due to the offset. If many people face similar situations simultaneously, what strategies might the insurance company employ?
At this moment, turning down the lump sum feels like stepping into a daunting unknown filled with strategies to limit or deny my benefits. Any insights or information that could aid me in making a more informed decision would be greatly appreciated. Thank you!
It’s understandable that you’re feeling overwhelmed with this decision, especially given your experience with disability claims and the complexities involved. Here are a few points to consider as you weigh your options:
Guaranteed Income vs. Uncertainty: The lump sum offer represents a guaranteed amount that can provide financial stability. On the other hand, continuing with the monthly benefits presents uncertainties, particularly if you’ve had negative experiences with the insurance company already. Consider how important financial security is for your mental and emotional well-being right now.
Possible Future Actions by the Insurance Company: Insurance companies often have strategies in place to protect their bottom line. This can include regular reassessments of claims or requiring additional medical documentation to confirm eligibility. If you choose to continue with the monthly benefits, be prepared for potentially challenging interactions that could involve requests for updated information or even investigations into your case.
Impact of SSDI: Your concern about SSDI is valid. If your SSDI benefits are reduced, understanding how that would interact with your long-term disability payments is crucial. It might be wise to consult with a financial advisor or an attorney who specializes in disability claims to get specific insights on how this might unfold in your situation.
Legal Fees: You mentioned potential legal costs associated with pursuing long-term benefits. Weighing those costs against the lump sum’s immediate financial security is important. It might also be useful to reach out to disability attorneys for consultations to understand the landscape better without a huge monetary commitment.
Personal Considerations: Reflect on your current situation—both in terms of finances and your mental/emotional health. A lump sum might alleviate some stress and provide you with more agency over your future financial decisions. On the flip side, if you feel there might be a chance of improvement in your condition, the ongoing benefits could be more financially advantageous in the long run.
Ultimately, this decision should align with your comfort level regarding risk and your need for stability. It might also be beneficial to seek advice from trusted friends or professionals who can offer additional perspectives tailored to your specific situation. Whatever choice you make, prioritize your well-being and peace of mind as you navigate this complex situation.