Ever since your Prudential long term disability insurance claim was approved, you may have wondered when your policy buyout offer is coming. Indeed, many long term disability claims are terminated early with a lump sum settlement offer instead of regular monthly payments. But this process isn’t automatic, and the decision whether to accept a lump sum disability buyout can depend on your unique circumstances. Below, we’ll explain more about Prudential’s disability insurance buyout procedures and what claimants can expect from the process.
Prudential Isn’t Required to Offer a Disability Buyout
Although Prudential routinely offers claimants the option to take a lump-sum disability buyout, there’s nothing requiring them to make this offer. Claimants who have only been receiving benefits for a month or two aren’t likely to receive strong offers, nor are claimants who are about to go “off claim” either due to their own recovery or a change in the long term disability policy’s definition of disability.
Because there’s nothing requiring Prudential to offer to buy out disability claimants, if you do get a buyout offer, it’s important to act on it as quickly as possible. This doesn’t mean blindly agreeing to the terms Prudential imposes – but by researching your claim payment history, you can get a good idea of whether this offer is a fair reflection of the value of your long term disability claim.
Lump Sum Buyouts are Calculated Based on Your Benefits’ Future Value
Calculating the appropriate amount for a lump sum settlement is a far more complex process than multiplying your current monthly benefit amount by the time left on the policy. Instead, these calculations rely on the present value of your policy, or “how much money must I have today to meet my needs in the future?” Because a single dollar now is worth far more than this dollar is likely to be worth in the future, claimants can benefit from receiving their disability benefits in one fell swoop rather than having them slowly trickle in over a course of years.
It’s also important for claimants to know that most buyout offers cap the benefits at 10 years, even if the claimant is entitled to lifetime benefits and is expected to live another 20 years or longer.
Buyouts Aren’t Always the Best Option for Everyone
There are risks and benefits to buyouts. On the risk side, in exchange for the lump sum buyout, the insurance company will require that the claimant gives up any right to future long term disability benefits. In most cases, the policy will be canceled when the buyout offer is accepted.
But despite these potential drawbacks, having a lump sum provides you with the flexibility that you just won’t get with monthly payments. Claimants can use these funds to catch up on bills, repair or improve their homes, or even invest. Claimants also won’t be at risk of having their claim suddenly denied one month without warning. Although accepting a settlement offer can mean giving up future money, as the saying goes, “a bird in the hand is worth two in the bush.”
If your Prudential long term disability claim was recently approved and you’re wondering about your buyout options, look no further than the disability insurance attorneys at Dell & Schaefer. We’ve helped thousands of claimants secure their long term disability benefits under a variety of conditions, and we can help you too – just give us a call today to schedule your FREE consultation!