Hey everyone,
My LTD insurance called me to see if I’m interested in a lump sum buyout.
I don’t know what to make of this. I never considered this as an option. If there’s someone here who’s been in a similar situation, please give me your advice.
I have approx 15 years left on my claim and, most recently, the insurance medical coordinator recommended that my file be put on maintenance.
Thanks in advance.
Two looming questions is how big of a discount they want to apply to the payments and how good are you at managing your money and controlling your spending. If you want to do something not allowed by your policy like move to a cheaper country or if your mental health is severely affected by the uncertainty it might be worth it. It’s free to find out what kind of number they have in mind.
Speak to a lawyer. A lump sum buyout has its pros and cons, but just always remember the LTD insurer is looking out for their interests, not yours.
They will try to lowball you. I am currently negotiating mine (actually just telling them no every time they up the offer) right now as well.
The Net Present Value (NPV) of your claim is about 74% of all your payments left to go over the next 15 years, assuming a very reasonable 4% discount rate. If they actually offer you that, then from a pure financial perspective it makes sense strongly consider it depending on your tax situation.
They will likely initially offer you about half of that, and I would tell them to go pound sand immediately.
If you accept a lump sum, make sure you understand the tax implications. If your premiums were employer-paid, your lump sum will come with a massive tax bill because it will drive you into the top tax bracket.
Also, make sure there is absolutely no reclaim wording in the release. For instance, you do not want a clause stating that if you are able to return to work in 5 years, you would have to pay back the lump sum or a portion of it.
Finally, make sure you have a disability/employment lawyer review the fine print. There are many clauses they can add that don’t sound important but have serious consequences from pension accruals to employment release. The insurer should offer funds to cover or contribute to that legal review.
Hi Bucket, how long have you been on LTD and is the buyout was offered or approached by the insurer to you or have you started the buyout conversation with them.
Many years. They asked me twice, each time with a a better offer, and each time I’ve said no thanks within an hour of seeing their email.
My last rejection to them I said don’t bother offering me anything again unless it’s 90% of my payments left to go with no fine print other than the confidentiality clause.
I’m happy just to stay on LTD until I age out.
If you don’t mind your disability is in regards to physical limitations or mentally or is it both and once you were transitioned into any occupation do they have bothered you with detailed exams or anything in particular where they have accepted that your claim is long term and will pay till age 65.
Thank you. This is good to know. I don’t know what they’ll offer but it’ll be interesting to see.
If you are still employed and receiving employment benefits, also flip through your benefits booklet to make sure anything that you rely on will continue when your LTD payments stop so long as you are still disabled.
Mine is purely physical. My insurer just requires me to answer a few questions each year to confirm I’m still disabled. It’s automated, not even sure a real person even looks at my answers.
I’ve been told by a lawyer that he’s never heard of someone getting a lump sum offer for a mental disability.