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What is a long-term disability buyout?

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If you have long-term disability insurance, there may come a point when you are presented with a buyout opportunity. Before you agree to a lump sum buyout, it is important to be aware of the terms and conditions.

Once the buyout is complete, you are no longer in a position to receive payments from the insurance company. Instead, you agree to take a lump sum of cash.

There are many benefits of a long-term disability buyout, including the option to take the money and invest it. This allows you to use the money in the manner you prefer. For example, the funds could be put into a retirement account or used to pay down debt.

Another benefit is peace of mind. Remember this: most long-term disability policies do not have survivorship benefits. This means that once you pass away all benefits will cease. You can opt for a lump sum buyout to protect against this. This is the opposite of a life insurance policy, with which your beneficiary will receive a payout if you pass on.

There may come a time when you are offered a long-term disability buyout from your insurance company. As attractive as this may be, you must compare the pros and cons before making a final decision.

There is a lot that goes into the buyout negotiation process. While you are hoping to get the best deal, the insurance company feels the same way. By taking the right steps, you can make a confident and informed decision for or against this. What matters most is that you feel good about the end result.

Source: FindLaw, "Lump-Sum Disability Insurance Buyouts Overview," accessed May. 18, 2015

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