The Disability Benefit "Buyout"

The Disability Benefit "Buyout"

The Disability Benefit "Buyout"

By Kirk Sloane B.A.(Hon), LL.B.

Lawyer, David Share Associates, Lawyers

Many disability claimants have heard or read about the following scenario: your disability insurer calls you on the phone, sends a representative to your home, or sends a letter proposing a lump sum payment to "buyout" either the future of your disability claim, a disputed portion of unpaid past benefits, or both. In many instances a buyout can be a desirable outcome, but a disability claimant needs to understand the ramifications of such a payment, have confidence that the proposed deal makes sense, and that the proposal is the best available option. Using experienced legal counsel can be an invaluable tool in assessing whether a buyout is the right thing to do and to ensure that the best deal possible is obtained.

One of the first considerations for an individual already receiving benefits is to determine the likelihood of the claim being terminated if the buyout proposal is rejected. Some insurers use the fear of a claim termination as a tactic to convince the claimant to accept a reduced amount. If the claim may truly be on the verge of a termination, however, there needs to be an assessment of the potential costs of a lawsuit and the likelihood of winning or losing the lawsuit. Those factors are essential in arriving at a sensible buyout figure.

Another important piece of the puzzle is to have a realistic assessment of the nature, extent and potential duration of a claimant's disability in order to make appropriate adjustments to the total future expected disability payments. In addition, a disability claimant needs a thorough understanding of the concept of the "present value" of future benefits in order to calculate the true value of the investment power of a proposed lump sum payment of future benefits.

When it comes to a buyout during litigation, the cost and risk factors for further litigation and the potential outcomes are much more prominent factors than in the claim context. In summary, buyout strategies can be complex and it is critical that a disability claimant utilize a lawyer with expertise in dealing with disability claims in order to ensure a satisfactory outcome.

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