Can I Get a Lump Sum Buyout If I Owe an Overpayment to My Disability Insurance Company?

There comes a point in most long-term disability insurance claims when a claimant has been approved and is being paid LTD benefits and then is awarded some other kind of benefit such as social security disability benefits (“SSDI”), retirement benefits, or workers’ compensation. Under the terms of most disability insurance policies, the other incomes offset the LTD benefits, leading to an overpayment of claims that insurers seek to recover.

While the right to recover the overpayment is contractual, there may be alternative options for satisfying the overpayment aside from paying your disability insurance company a large chunk of money.

Insurance companies seek recovery of overpayments in various ways, including:

1. Immediate Repayment: Requiring the claimant to repay the full overpaid amount upon receiving the additional income.
2. Benefit Reduction: Reducing future monthly LTD benefits until the overpayment is recouped.
3. Benefit Suspension: Withholding monthly LTD benefits entirely until the overpayment is fully recovered.

Lump-Sum Buyouts and Overpayments – An Alternative Option

A lump-sum buyout, also known as a lump-sum settlement, is when you are approved for LTD benefits and your disability insurance company offers a one-time lump sum payment to end your claim and any future obligation they owe to you (and you to them). This includes ending your coverage under the LTD policy.

The option of a lump sum buyout can be appealing, providing immediate funds and eliminating ongoing interactions with the insurer, particularly when there is an overpayment on your claim. The overpayment is wiped out and your relationship with the disability insurance company ends.

Considerations Before Accepting a Lump-Sum Settlement

It's crucial to recognize that insurance companies often propose lump-sum settlements that are financially advantageous to them. These offers may be lower than the total value of future benefits you are entitled to receive. Accepting a lump-sum settlement also means relinquishing any future claims under the policy, which can have significant long-term implications.

Before agreeing to a lump-sum buyout, especially when an overpayment is involved, consider the following:

• Financial Impact: Decide whether the lump-sum amount will be enough for you to survive through retirement age (which is when benefits would have ended under the LTD policy).
• Tax Implications: Understand the potential tax consequences of receiving a lump-sum payment. Consult a tax advisor or accountant to understand any potential tax implications.
• Medical Condition: Consider the impact of your medical condition and the likelihood of future disability.
• End of Claim: Consider the implication of settling your long-term disability claim including no future coverage under this LTD policy or with your disability insurance company. It is also important to consider how ending your claim may impact other benefits you are entitled to because of your long term disability insurance claim. Specifically, this could include health insurance or retirement contributions from your employer or former employer.

Legal Assistance from the Experts

Given the complexities, and future impact, an overpayment and lump-sum settlement can have on your long-term disability claim, it is important to consult with an experienced long term disability insurance attorney. An attorney can help you:

• Interpret Long-Term Disability Policy Provisions: Clarify your obligations regarding overpayments and the feasibility of a lump-sum settlement.
• Negotiate with Insurers: Advocate on your behalf for a fair settlement and ensure that any overpayment is taken into consideration and relieved through the settlement.
• Protect Your Rights: Ensure that your rights are protected throughout the buy-out, preventing potential pitfalls.

Our Lawyers Specialize in Disability Insurance Claims

Because our law firm has always focused only on disability insurance, our lawyers are experts in legal representation for disability insurance benefits. That means our disability lawyers have:

1. Won several major disability lawsuits that help make better law for disability claimants;
2. Experience fighting every major insurance company, such as UNUM, Hartford, MetLife, CIGNA, Prudential, and more.
3. Successfully represented hundreds of clients and won millions of dollars in disability benefits.

Because federal law applies to most disability insurance claims, we can help clients across the country.

Disability insurance companies have lawyers. You should too. Call Dabdoub Law Firm to get experienced disability lawyers on your side.

We can help with:

• Submitting a disability insurance claim;
• Appealing a long-term disability denial;
• Negotiating a lump-sum settlement; or
• Filing a lawsuit against your disability insurance company.

Call (800) 969-0488 or contact us onlinefor a free consultation with a disability attorney. There are no fees or costs until you get paid.