You’ve always been the cautious type, so when you were injured, you knew that you had your long-term disability plan to fall back on.
Unfortunately, your injuries turned out to be more serious than you expected – and the insurance company is offering you the opportunity to take the remainder of your benefits in one lump-sum payment.
Should you accept? Here’s what to consider:
The insurance company is making the offer to save money
The insurance company really doesn’t care about your bills or your future needs; they care about saving money. The lump-sum payment is definitely going to be less than you would receive if you stretch out the payments over time, so you need to take the difference into account. Know how much you’re losing before you consider the trade-off.
It can be an advantage if you have pressing financial needs
You may have a plan for how you’re going to manage your future finances, whether that means applying for Social Security Disability benefits or something else – but your current financial needs may be weighing on you quite heavily.
If the lump-sum payment is enough, for example, to make renovations to your home that will accommodate your disability and allow you to remain there, that might be a good reason to accept.
It ends your relationship with the insurance company (for good or bad)
Probably the biggest advantage of a lump-sum settlement is that it ends your involvement with the insurance company involved. That can feel like a huge relief if you’ve found the paperwork, questions, re-qualification process and other steps to be intrusive and frustrating.
On the other hand, it also ends the insurance company’s obligation to you. Once you accept the payout, you cannot argue for more benefits.
There may be tax issues that should be considered
Typically, you will owe taxes on any part of your disability insurance proceeds that were paid for by your employer. Before you accept a lump-sum payment, make sure you understand exactly how big of a bite those taxes will take.
This is ultimately your decision – but it’s not one that you should probably make alone. Experienced legal guidance can help you protect your rights and your financial interests.