There are several elements to consider when deciding whether a long-term disability lump-sum settlement is right for you.
Ultimately, this is a big decision that can have serious implications on the quality of the rest of your life.
If you’re considering accepting a lump-sum settlement from the long-term disability insurance company, read on to learn some of the elements you’d be wise to consider.
There May Be Tax Implications
Before accepting a lump-sum payment for your long-term disability benefits, you’ll want to determine how the plan was paid for. The taxes you owe will primarily depend on who paid the insurance premium.
If you paid for the premium with money that had already been taxed, then your lump-sum settlement should be tax-free.
However, if you paid for the premium with money that had not yet been taxed or if your employer paid for the premium, you may have to pay taxes out of your settlement at regular income tax rates.
Additionally, if you must pay taxes on your lump-sum settlement, you may end up with negative tax consequences. This is because you would pay taxes at a higher rate than if you received the compensation over time.
Your Settlement Will Likely Be Reduced As a Lump-Sum
It may be tempting to accept a lump-sum settlement from the long-term disability insurance company, but it’s important to realize that you stand to lose money by doing so. The insurance company is paying your claim up front in the form of a one-time lump sum payment. The lump-sum amount will likely be lower than, or a percentage of, the total value of your claim.
Deciding whether to accept a lump-sum payment is an important decision that must be made with a full understanding of the implications.
For some people, being out from under the watchful eye of the insurance company is enticing. For others, the stability of monthly benefit payments is necessary. You must decide what is right for you and your family.
If you need help with your long-term disability benefits, don’t hesitate to reach out to our office right away with your questions.
Call Dabdoub Law Firm today at (800) 969-0488 to speak with an experienced attorney about your case.
