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Should I take lump sum payment from disability insurance (Unum)

Macomb, MI |

my wife has been receiving long term disability monthly checks from Unum since 2004. Receives SS disability beginning 2006. She will be 54 yrs old in July. Unum called her yesterday offering a lump sum settlement, 67% of the total monies she would be paid for the life of the contract.

1. If she doesn't take the settlement, will Unum harass her by requesting more dr. statements, etc?
2. Is it possible to "deal" and get a higher % ?
3. Is there anyway to lower the amount of tax we would owe on a lump sum payment, such as thru investments or buying real estate? policy was employer paid.

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Attorney answers 3

Best Answer

This is really a math question that you should consider by reviewing your finances and cash flow. Here's the deal though, they would not be offering you a cash payout if they thought it would cost them more than paying you your monthly amounts. Keep that in mind. They are trying to convince you to take a payout because it will cost them less money. Take it or don't take it but they are not trying to do you any favors. As far as your specific question go, (1) If you do not take the money then for sure the carrier will require continued verifcation of disability. (2) You may get an offer of a higher percentage if you ask but it may be simply standard operating procedure for them to offer the percentage that you have. If you are thinking about taking the payout absolutely demand more than their offer. All they can say is no. With regard to the tax question, you really need to ask a CPA. Hope this informaton helps.


I have handled a few LTD buy-outs, so I'll add my 2 cents here. 60-70% is the approximate range that LTD carriers are willing to pay to buy-out an ongoing LTD claim, but that 60-70% is not calculated based on the value as a normal person might calculate it. When disability carriers settle claims (whether disputed or undisputed claims), they do so based on the "net present value" of the claim.

Since I don't know the numbers on your wife's case, I'll use an example I gave to someone else to illustrate: 16 years of benefits at $800 per month adds up to about $153,000, but that does not take into account the time value of money. The money you are owed for next month is worth $800 today, or pretty close to $800, but the money you are owed for your last month of benefits 16 years from now is not worth $800 today. It's worth what Unum would need to put in the bank today which, once compound interest is calculated, would give them $800 to pay you 16 years from now. Settling an LTD claim is kind of like taking a lump sum when you win the lottery - you get much less when you take it all at once than when you take it over 20 years. The problem is, you never know if Unum is going to keep paying for the next 10 years, or cut you off tomorrow.

Please, please find an attorney to help you on this. Yes, it is possible to negotiate with them and get a little more money - probably not a lot, but some. There are just so many little details involved that it's just not worth the savings of going it alone. In fact, many LTD carriers will offer to help you pay an attorney's fee if it means they can get the claim closed/settled. Either way, best of luck to you.

Jeremy Bordelon is a licensed attorney in the State of Tennessee only, and is authorized to practice in all Tennessee State and Federal courts, and before the Social Security Administration in any jurisdiction. Please call our firm at 1-866-959-5362 if you would like to discuss your case in more detail. The answers provided on are for information purposes only, and should not be relied on as legal advice. This answer does not create an attorney-client relationship between us. In some jurisdictions, this answer may be construed as attorney advertising.


This is an offer, and you have a right to counter-offer or reject. Unum, if you do not agree on a buy out, does have a right to periodically assure themselves the disability is continuing.
As for the wisdom of accepting a buy out, all of the relevant information has to be considered.
Regarding taxation, there may be a number of options.

To the PROSPECTIVE client, my answer to your question(s) is for general purposes and based upon what little information you have conveyed. It is based on such limited information that the general answer should never be relied as a reason for your action or inaction. My response does NOT establish an attorney-client relationship and such may only be established by mutual agreement, and the signing of a written retainer agreement. For an appointment please call please call 586-778-0900 or contact via email.



Thank you everyone for taking the time to answer. A little clarification (from me) Presently, Unum only requests info 1x a year. I was just worried that it would become a monthly thing, like it was at the beginning of LTD. We really don't "need" the cash now, but thought it might be a good way to purchase a home for us instead of renting. Thought that I might look for a foreclosed home where we could pay cash. Mr. Brennan, If you could give me a clue about the options for taxation, I would very much appreciate it....I do understand that what you say is not binding, just a point in the right direction.

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