If your long-term disability claim is denied and you file a lawsuit at some point the insurance company may come to you with a lump sum settlement offer. Should you take it?
Each case depends on its own facts and, presuming that you have an experienced disability attorney, you should discuss these matters with your attorney.
Here are the things most long-term disability claimants should be thinking about:
- If you win your case in court the judge cannot award future benefits. The most you will get are your back benefits. You will be returned to claim and generally required to continue providing proof of claim for as long as you're disabled.
- Under most long-term disability insurance policies you are protected in your "own occupation" for only the first two years. After that you generally must show that you cannot work at any "gainful occupation." This is a much higher level of proof.
- Receiving a lump some settlement all in one year may create an unexpectedly high tax burden. You should discuss this with your financial advisor.
- Overall, these cases are tough to win. The law is designed to favor the insurance companies.
Note that this is different than deciding on whether to except the buyout of a long-term disability policy where you are still on claim. You can read the factors to consider for that situation here.