I became Disabled on April 4, 2011 with Bilateral Diaphragmatic Paralysis. Sunlife only pays LTD till you are 65 years old. I am 43 years old now. The 2 offers were $9000 and $9274 which I refused because I did not think they were high enough. If I take my $100 a Month till I am 65 they will have paid me an additional $26000. I was wondering what is the lowest amount I should except. I also want to know how do they come up with their offers. They don't make any sense to me except to get out of paying on the claim cheeply. I figured that an offer of like between $12500 to $14000 would be a great offer. But they informed me they don't dicker with me on the offers. You take what they offer or not they said they don't care. How can I get them to pay what I want them to pay?
There are a couple of factors at play. First, SunLife knows you will never hire an attorney over such a negligible account. Second, SunLife knows that the worst case scenario is that they pay you $100 a monthyfor 22 years, which will have no impact on their bottom line. Third Sunlife knows that $100 a month doesn't do you much good, but that 9k all at once will buy you something useful or enjoyable. In short, they pretty much have you where they want you.
First, they are never going to pay you the full value of the claim. The reason they want to buy you out is to save themselves money, and paying full value does not do that. Then, they are going to reduce the full value of your claim to present value dollars, since they value of $26,000 now is more than the value of $26,000 between now and when you turn 65.
As far as advice on what offer you should accept I suggest you hire an attorney who can walk you through this process, hopefully one who has LTD experience and experience dealing with Sun Life.
I agree with Mr. Kerr. Let me explain a little bit about how Sun Life, and all similar disability carriers, think about the math in cases like yours.
You're 43 now, so there are 22 more years of payments due until you turn 65 and the policy ends. 22 years x 12 months = 264 months of payments, given or take a few, or a little over $26,000 in benefits at $100 per month. I see how you got there, but that's not what Sun Life is concerned about. They're concerned about how much money they need to have TODAY to be able to pay you those benefits for the next 22 years.
Sun Life and similar companies - big corporations - can usually earn between 5-6% on their investments. At that rate, if they invested about $15,000 today, they'd have enough money to pay you $100 per month for the next 22 years, eventually paying the whole $26,000 over time between the $15,000 they invested and the interest they earned on it over time. That's what they think of as the "present value."
On top of the present value calculation, they'll usually also do a "mortality reduction" - in other words, they calculate the percentage chance that you might die before you reach age 65, in which case they wouldn't have to keep paying you. Depending on your medical condition and overall health, this number could vary widely, and they usually won't tell you what it is. I know they never want to tell me. In any case, the number they think of as the total value of your claim = the present value multiplied by the mortality reduction. They usually come out at about 85-90% of the present value. In your case, that probably takes it down to about $13,000. Depending on how serious (life-threatening) your condition is, it could be less.
Then, once they have that number, they estimate your chances of receiving benefits to age 65 for other reasons - chance of recovery, chance of returning to work without recovery, chance that Sun Life will find a defensible reason to deny your claim even if you haven't recovered or returned to work. Analyzing all those factors, disability insurance companies seem to make offers to settle open claims in the neighborhood of 60-75% of present value (or what they claim is a higher percentage of the post-mortality-reduction value). Their offer of $9,274 is a little over 60% of the present value of your claim, which is a little low in my opinion, but not surprisingly so.
Just to be clear, I'm not saying any of this is fair - I'm just saying that's how they think of it, and that's what they offer. To answer your final question, how do you get them to pay what you want them to pay, you can't. You can try to negotiate with them, but what they told you is pretty typical - they really don't negotiate much on these buy-outs. Ultimately, if you don't like the number, all you can do is decline the offer and stay on claim - continue receiving the $100 per month - unless they've denied you. You could try to hire an attorney to help you on this, and by all means do, but to be honest you may have a hard time finding anyone who knows anything about this who will work on it for a fee that it makes sense for you to pay. It wouldn't make sense to pay an attorney $3,000 to get Sun Life's offer up $2,000, because in the end you'd have less in your pocket.
Best of luck to you with your condition and your claim.
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