Ehline Law Firm Personal Injury Attorneys, APLC / Pros And Cons Of Lump Sum Disability Settlements
Page Updated 12/08/2021
Disability insurance works in a very technical way, which can make settlements and the disability claim process a tad bit difficult. Paying for disability insurance each month keeps you secure from any accidents that may cause disability.
A disability affects an individual’s job status and income as victims often end up on unpaid leave.
With disability insurance or workers comp settlement, a victim can get all the disability benefits to help them live a normal life.
The disabled individual gets monthly payments from the insurance company once their disability benefits get approved. These benefits come to a halt once the victim has resumed work, requiring the individual to start making monthly payments towards the disability insurance to secure themselves for the future.
There may be situations where you can draw on a lump sum settlement instead of taking monthly payments as benefits, however, it is wise to speak to an attorney and see your legal options before making any decisions. There are benefits and drawbacks to taking any decision, so let’s go over a few pros and cons of lump sum disability settlements.
One of the major drawbacks of disability insurance is that you can not transfer it to the beneficiaries when you die, unlike life insurance.
There may be a situation where you would want to draw on a lump sum settlement, such as with serious health conditions, to ensure the financial safety of your kids, family, or beneficiaries. In such situations, it is best to take out a lump sum settlement from the insurance companies rather than monthly payments.
Many people prefer to have a lump sum settlement as they simply can not deal with an insurance company over and over again. This is because when you’re drawing on monthly payments, you need to fulfill specific criteria of these companies to continue enjoying disability benefits.
However, once you do not comply with such criteria, you may find that it’s a constant argument back and forth with insurance companies. To get rid of the insurance company altogether, lump-sum payment is a great option.
Some people are financially savvy and would invest the lump sum money from disability claims to maximize their returns and make substantial profits. If you’re one of those people, then getting a lump sum payout is the best option for you.
A temporary disability is one of the reasons why you should avoid cashing out on lump-sum payments from the insurance company. This is because you would want your insurance policy to continue after you have fully recovered.
Insurance is a great way to secure yourself financially and taking a lump sum payment can put you in a tough predicament later on in life. What if you’re faced with a problem later on in life and have already exhausted the lump sum settlement, you would need to have an insurance policy to continue receiving disability benefits throughout your life in case of any disabilities.
Many people are not good with finances and spend all their lump sum in one go without saving. This can impact their lifestyle later on in life when they need money and they don’t have it. Taking out monthly payments is a way for these people to remain financially responsible.
Insurance companies don’t mind providing a lump sum payment depending on the age of the policyholder and their long-term disabilities. However, you should consider the following things before accepting any lump sum offer.
Oftentimes disability insurance companies would pay less than what your current value of disability claim is and to determine your current value you need to find the present value of your future benefits.
Calculating that would give you an idea of how far off the disability insurance company settlement offer is and you can then seek legal advice from a disability insurance attorney.
Some disability insurance policies allow for monthly adjustments such as an increase in the cost of living or a hike in medical treatment costs. You need to take into consideration such fluctuations when calculating the present value of your future disability insurance benefits to help you determine whether it is a good option to take lump-sum settlements.
Life expectancy plays a huge role in determining whether an individual should consider a monthly disability benefit or go for a lump sum disability settlement. If you’re older and know that your medical condition is not getting any better.
You should consider taking out a lump sum amount from the disability insurance company so that your beneficiaries can utilize it in the near future. But if you’re young and have a long way to go until retirement, it is better to stick with monthly payments.
Taxes are a huge concern for anyone looking to take a lump sum amount of money, whether it is insurance settlements or profits from investments. You have to pay taxes on your lump-sum settlements and therefore consulting with a lawyer for tax implications before accepting any lump sum offer is the right way to go.
If you’re not sure about taking out lump sum settlement as your disability benefits or want to know about tax implications on a lump sum settlement, speak to our disability lawyer now. Contact us at (213) 596-9642 and get a free initial consultation now with an expert California disability lawyer now!
Ehline Law Firm and our Los Angeles injury attorneys have recovered over $150 million for our clients and can help you do the same with your disability insurance company.
Insurance companies try to avoid monthly benefits or giving a lower lump sum settlement and if you’re having any difficulty in dealing with them, we can help assess your disability insurance policy and deal with the disability insurance company on your behalf.
Contact us now and get a free consultation today!