When Is a Lump-Sum Payment the Best Resolution to Your NY Insurance Case?

During settlement negotiations, insurance companies may offer a lump-sum payment to settle your long-term disability claim. Rather than receiving monthly disability benefit payments, the insurance company would provide a one-time cash settlement, which terminates its obligations to pay you benefits.

When negotiating a disability claims settlement, it is important to understand the advantages and disadvantages of accepting a lump-sum payment.  Some of the benefits include:

  • You can invest the proceeds as you see fit — With a lump-sum payment, you have the freedom to decide how to spend or reinvest the proceeds. Rather than use the money to cover monthly expenses, you may choose to finance a child’s education, boost your retirement savings or fund a business venture.
  • You avoid the hassle of ongoing obligations — You must generally submit ongoing medical records and other documentation to maintain long-term disability benefits. With a one-time payment, you eliminate the burden of dealing with the insurance company for many years to come.
  • You don’t have to worry about claim termination — While the insurance company may initially approve your claim, they are always looking for reasons to deny or terminate benefits. Obtaining money up front helps ensure that you have financial security.

Of course, a lump-sum payment is not the best option for everyone. Once you execute a settlement, you are responsible for managing your own medical care. Even if your situation worsens, you will have no right to seek additional care or reimbursement from the insurance company. In addition to evaluating the tax consequences, you should also explore whether the acceptance of a lump-sum payment may also affect your eligibility for other benefits, including worker’s compensation, Social Security Disability benefits, and Medicare or Medicaid.

In most cases, this is not a decision you should make alone. A knowledgeable New York disability lawyer at Michael Sepe, LLC can help you weigh the advantages and disadvantage of a lump-sum payment and negotiate the best possible resolution to your disability case.