Lump Sum Disability Settlement Calculator

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If you have been offered a lump sum settlement by your disability insurance carrier, you need to know the present value of your claim to make an educated decision. This calculator does all the hard work for you, and can even generate a nice looking report showing every monthly payment so you can see how the value of each payment is reduced over time (to account for the time value of money).

It also has advanced features, allowing you to include an annual Cost of Living Adjustment (if your policy includes one), past monthly benefits (with interest), and attorney’s fees and costs. These are optional, so if you don’t need these functions, just leave them at their default values.

Do not expect your disability insurance carrier to ever offer you the full value of your claim as a lump sum buyout, even after your claim is reduced claim to present value. They know that there is significant value in never having to deal with them again. They also recognize the possibility that you could eventually recover or find some type of work that meet your capabilities. Most lump sum offers will fall somewhere in the range of 50%-80% of the present value of your claim. If you case is in litigation, the offer may be lower as the insurer has already determined that it has the chance to deny your claim and never pay you benefits again.

So, what amount is fair? This will depend on your individual situation. How confident are you that the insurer will never be able to cut off your benefits? How much is it worth to you to receive your benefits up front and never have to deal with your insurer again? Do you think you may be able to find work you can do in the future (if you do, you don’t have to pay the lump sum money back). The calculator can’t tell you these things, but it will let you know the full present value of your claim so you can apply the appropriate percentage to it.

Lump Sum Calculator

Monthly Benefit: $

Number of Past Monthly Payments Due:

Interest Rate on Past Benefits: %

Number of Future Monthly Payments Left:

Discount Rate: %

COLA Rate: %

Month When COLA Starts:

If your next COLA increase is 3 months from now, enter: 3

Number of Annual COLA Increases Left:

(Leave “0” to add COLA to every year)

Attorney’s Fees: $

Costs: $

Present Value of All Benefits, Fees and Costs $

Want a Detailed Report Listing Every Monthly Payment (Including Total) Instead?

(Opens in a new window)

Were you looking for a lump sum mortgage calculator? There is one here.

The formula used to reduce each future monthly benefit to present value is as follows: PV = MB/(1 + DR/12)^NM, where:

  • PV = Present Value
  • MB = Current Monthly Benefit Amount
  • DR = Discount Rate (expressed as a decimal, e.g. 4% = .04)
  • NM = Number of Months into the Future Before Payment is Due
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48 Responses to Lump Sum Disability Settlement Calculator

  1. Loren PiercE says:

    Thank you, I used your calculater just a few days ago to settle my LTD disability claim with UNUM. I plugged in all the numbers and used the standard 4% discount points, I then tood that final number and multiplied it by .70 (70%) and submitted my buyout request to UNUM and they accepted the offer without further negotiations. I settled my claim for $75,000.

  2. Melissa says:

    How did you determine a 4% standard discount rate? It seems a bit high considering current market rates. Thanks in advance!

    • I say the 4% is “standard” because it is commonly agreed upon by both plaintiffs’ attorneys and insurers in disability cases. Of course plaintiffs think it should be lower (2%) and insurers think it should be higher (6%), but 4% over the usual time horizon for a disability case seems fair.

      Given current market rates, I’d somewhat agree with your thought that 4% is a bit high, if you have a short period of time (say 5 years or less) left on your benefits. Of course, if you have that short of a time horizon, a 2% change in the discount rate isn’t going to have much of an impact on your lump sum anyway. The problem is that the whole point of the discount rate is to predict what rates of return will be over many years into the future. Disability cases will often have a 10-20 year horizon, so today’s rates may not be predictive of future returns.

      If one were only to use rock solid investment vehicles like a savings account, the rate would be lower (I just heard on Clark Howard that the best online savings account is paying 1.25%). Of course, it’s assumed that most people would want a larger return on their money than that and would be willing to accept even a small risk to achieve that.

      For example, if one were to look at the performance of the Vanguard S&P 500 Index Fund (a relatively common “safe” investment) over the past 10 years, it has a load adjusted return of 4.6% (which includes a 37% loss in 2008, which is pretty uncommon).

      You could argue for a lower discount rate if your time horizon is short, but I think for anything over 5 years, 4% is pretty reasonable.

  3. scott seitz says:

    Can someone tell me what I should accept on my ltd lump sum payout if my monthly payment from ins carrier is 2259.00, ssdi 650.00, turning 40 yrs. old this month so 300 months left in payments, and if you subtract the ssdi 650.00 from 2259.00 ltd payment each month that equals 1609.00 monthly I am actually getting from insurance carrier of ltd. Please tell me if I accepted 70% range….Also, would I have to pay taxes on lump sum payout & what happens to my ssdi of 650.00 per month..? Any professional & expert advice would be greatly appreciated.

    • Whether you owe taxes on the LTD benefits largely depends on whether your premiums were paid from pre-tax or post tax money. If they were paid from pre-tax payroll deductions, you owe incomes taxes on the benefits (and accordingly on a lump sum). If they were paid from post-tax money, you shouldn’t owe federal income taxes (check with a local CPA for state tax issues) on the benefits.

      Your SSDI won’t be affected by your receipt of LTD benefits (only SSI benefits are means tested). You’ll continue to receive your monthly SSDI even if you settle your LTD claim, which is why the LTD carrier reduces your monthly benefit by the amount you get from SSDI.

  4. scott seitz says:

    Can an expert or professional tell me what I should accept with a lump sum payout since my variables are such: been on LTD since 2009, turning 40yrs. old end of April 2013, monthly LTD is 2259.00, SSDI is 650.00 so offset payment per month is actually 1609.00, and cut off for benefits is at age 65. With all this mentioned, do know my treating Doctor has fully documented that I am Disabled for Lifetime. Therefore, what is the maximum lump sum payout I should accept due to present value, interest rate, and 300 months being left for benefitsmonthly? Elaborate advice will be greatly appreciated, immensely

    • I’m sorry, but that would be the legal equivalent of a doctor writing you a prescription over the Internet based on your self-described symptoms. While it’s great that your treating doctor supports you, many LTD claimants have their claims denied (and subsequently lose in court) despite the full support of their doctors. Use the calculator to figure out your maximum benefits based on your monthly amount after SSDI is taken out and the number of months remaining until your benefits run out. Due to your age, this will be a pretty sizeable amount (it will also give the insurer plenty of chances to try to cut off your benefits over the coming years — they can keep trying again and again). Once you know the maximum amount, you’ll need to figure out an appropriate percentage to reduce it by to account for the risk of being cut off (you’ll likely underestimate this, so make it bigger than your gut tells you to). Without a detailed review of your file, or even knowing whether you have an ERISA plan or not, a lawyer can’t even ballpark that number.

  5. Mike Walker says:

    My LTD carrier offered me a lump sum settlement based on present value. I have SS and SSD offsets. My sons will be turning 18 in 2 weeks. I have received my last SSD check this month. The disability company is aware that their reserve is going up in 2 weeks, thats why they are offering me a settlement. My question is: is it bad faith on the insurer to offer me a low ball settlement based on both offsets (ss & ssd) when the ssd offset is ending and the insurer will be responsible for paying me $900 more a month? Thank you for your help.

    • While it’s certainly deceptive, I doubt that it would be grounds for a bad faith lawsuit (assuming one could even be brought, which is doubtful if this is an ERISA LTD plan). The insurer can make its lump sum offer as low as it wants, given that it is not required to make such an offer at all. If the insurer sent you something in writing showing that it calculated your lump sum based on a social security offset that it knows is about to expire, it may be worth notifying your state’s Department of Insurance. It is doubtful that this is the first time the insurer used such a ploy, and it would be helpful to future claimants for the state to be made aware of this practice, even if it can’t do anything to help you right now. There are actions the state Department of Insurance can take to punish an insurer even if bad faith remedies are not available to individual claimants, so you can at least have the satisfaction of causing them some major headaches over this conduct.

      • Mike says:

        Thank you. I do have a letter and calculation from disability carrier, which is ERISA. I consulted an actuary and the reason for the “low ball” settlement offer is because of the interest rate carrier is using 5.16%, in which she says I could never make my money back at that interest rate today. There is no bank/investement offering that percentage. The carrier has under valued my settlement by $100k. I thought it was the SSD offset, which turns out to equal the same amount as using the 5.16%. The layman person wouldn’t understand or catch on to their tatic. I knew what my claim was worth, just glad I had someone look at it to fully understand what carrier was trying to pull.

        • Actually, a 5.16% discount rate is not terrible for this industry. It’s certainly not bad enough to claim that the carrier acted in bad faith. While you probably couldn’t see that return using 100% safe investments, like CDs or savings accounts, you could easily see that or more using an S&P 500 Index Fund, or a mix of safe and “relatively safe” investments. Just doing some quick research, the S&P has had returns of 14%, 16.87% and 12.71% over the past 1, 2 and 5 years, respectively. You could use my calculator, along with a letter from your actuary supporting a lower discount rate, to try to push for a different amount. I wouldn’t get my hopes up too high for a big move, though. The insurer will also take into account the odds of you dying (I know, it’s morbid) before you collect all of your benefits, and most plans don’t keep paying after the beneficiary’s death (though they may have a one-time death benefit, it usually won’t be near as much as the rest of your monthly benefits).

          If the insurer sees no advantage in paying you a lump sum, it will just keep paying you monthly and hope that something happens that allows it to cut you off later, or that you die before the maximum payment period. Not having to worry about being cut off is worth giving a little on the discount rate to most insureds. Plus, if you have family that financially depends on you, getting the lump sum is more security for them.

          I’m not saying you should take the 5.16% discount (or that you shouldn’t). Just know that there are other factors to consider before ruling it out (or settling for something that isn’t actuary-approved).

  6. S Dixon says:

    Finding your Calculator is fantastic. I have to speak with UNUM Claims Specialist tomorrow. My situation is that I’d been in UNUM’s EDU for a awhile. I’ve supplied Doctor’s update every 2 years or so and things remained quiet. I have severe Degenerative Disc Disease, Myfacial Pain Syndrome after a series of car accidents and bad surgeries (On LTD since 2003). No recovery expected. Last Nov.2012 I received a huge packet requesting all new authorizations, including one for all my SSDI files, Income proof and tax returns, daily activity etc. I was also told I was to schedule a Home Visit (declined Visit, not in my Contract)and pretty sure I was under surveillance. All a big flag. Most recent letter stated my Doctors report from Oct. 2012 was irrelevant – same report was OK 2 years ago. Other concern is I’m in Overpayment status _ I owe $60K so get $0 from UNUM. The recent letter said they will collect by any means if they close my claim. Today I decided to ask for a Buy Out and wasn’t sure what my Contract was worth now I know. ( I’m 61 yrs., pd to 67 yrs. $1067.85 a mo.) Should cash me out and pay overpayment if they don’t discount too much. Hope UNUM just wants me off their books. I do have an ERISA plan, but was told years ago my situation isn’t worth it to any lawyer. Will welcome any advise.

    • Assuming you agree that the overpayment is genuine and accurate, it sounds like you have the right idea in asking that they wipe out the overpayment as an offset against a lump sum payout of your remaining benefits. As it stands, you won’t be getting very much more than that even if Unum continues to pay you monthly until the maximum benefit date — and it doesn’t sound like they intend to do that because it sounds like they’re setting you up to be cut off.

      One good thing about your case being governed by ERISA is that Unum will have problems trying to recover the overpayment amount from you through any means other than what it is doing now — withholding payment of benefits. Just as your potential state law breach of contract claim against Unum is pre-empted by ERISA, so too would Unum’s claim to be reimbursed for the overpayment. Two U.S. Supreme Court cases, Great-West Life & Annuity Co. v. Knudson and Sereboff v. Mid Atlantic Medical Services (I’m using Wikipedia links instead of links to the actual cases so you can just get a quick summary of what the cases said), established general rules for how such reimbursement claims can be brought. In a nutshell, Unum would only be able to sue you if it could identify the specific money in your possession which resulted in the overpayment. So, if this is from SSDI benefits or a personal injury lawsuit recovery, but you spent that money already, Unum could just be out of luck. It can’t seek reimbursement from just any money you have. Under ERISA, it is limited to equitable remedies, which in this case means that it must show that the money it is seeking to collect from you is the money which caused the overpayment.

      So, even if Unum cuts you off now, its threat to to “collect by any means” is somewhat empty unless you still have funds that are traceable to the payment which resulted in the overpayment, and those funds haven’t been commingled with your other assets.

      This is good news for you, as it makes it more likely that Unum would go for the idea of satisfying your overpayment by paying itself a lump sum of your future benefits. I wish you luck.

  7. S Dixon says:

    This is the best info I’ve heard in years! The money ( from SSDI Lump Sum) is gone. I had put the overpayment in a separate bank account & closed that account once all funds were gone. Could UNUM override ‘equitable remedies’ since they had me sign a ‘contract’ to pay back SSDI once received ? Can they put a lien on my property or ruin my Credit Rating?
    Hopefully, they will see a buyout is in both parties best interest, still worried, but you have given me hope. Thank You!

    • Signing a separate reimbursement agreement with Unum does raise more issues. Not to get overly complicated, but these agreements often tend to characterize the benefits paid to you by the LTD carrier as being the “separate fund” from which you will reimburse it for the SSDI overpayment (because there are already statutory protections against placing a lien on SSDI funds). They claim that it’s not the SSDI money that they are going after, but the excess amount they paid you in your monthly LTD checks for the period covered by your SSDI award. This reimbursement agreement attempt to create an equitable trust over those funds, but it is still subject to the argument that these are not separate funds and that the insurer is really still trying to recover from your general assets (which isn’t permitted in an equitable claim). This article by Glenn Kantor discusses a case out of California dealing with such a reimbursement agreement post-Sereboff, in which the court found that a separate fund had still not been identified.

      Unfortunately, this area is still hotly contested, and caselaw on the subject varies in the different federal circuits. I can’t give you a definite answer on whether Unum has a legitimate claim to any of your funds. However, I can tell you that this area of law is so messy and evolving that I think it will work in your favor when you try to wash this claim out against your future benefits.

  8. Cheryl says:

    I have not received a settlement offer yet, but did receive a letter telling me they will pay me 1910.52 a month for the next 23 years. Do I have to wait for them to send me a settlement letter? I am currently awaiting SSD/SSI outcome, but the stress of dealing with my LTD company is only making me worse. If I do not have to wait, how do I go about getting this started so that I may regain some control over my life.

    • The insurer may not be willing to pay a lump sum to settle the entire claim at this time. You could always ask, but there is a danger in doing so before your SSDI case is decided. If it would want to pay a lump sum settlement at all, the insurer would definitely want to base such a calculation on the assumption that your SSDI claim will be approved (and reduce your monthly benefit by the amount you are expected to receive from SSDI). So, you could settle for a much lower amount based on that assumption and then get denied SSDI benefits, which would be awful. If you do want to suggest a lump sum settlement to the insurer, it would be wise to wait until after your SSDI claim is approved.

  9. Dennis says:

    I am receiving a 2170.00 monthly LTD payment along with a 2079.00 monthly SSD payment. I have 76 payments left on LTD insurance. I inquired of the LTD insurance company if there was a chance of a bulk amount buyout.
    After about 2 weeks, they came back with a buyout of 80,000.00. After speaking to the insurance company and receiving their letter of explanation, I told them I would get back to them after talking to my attorney and accountant. My attorney suggested I go on line and find a lump sum calculator to help me understand why they came up with that figure. I used your calculator that you provide on your website and came up with a figure or 146,211.00 and then when I subtract the 25% that they say they use in the formula, I arrived at a figure of 109,500. The insure company said I’m not taking into effect the :morbidity and mortality rates that they use.
    My question is, am I stuck at where they offered me, or can I find a way to get the offer to where it is fair to both of us?
    Thank you in advance for your help.

    • This is really just a matter of negotiation. There’s nothing you can do to force them to make a higher lump sum payout, as they are only contractually obligated to make monthly payments. I can’t say whether $80,000.00 is their top dollar, but it does seem that they are being pretty generous with their chances that you’ll die before 76 months from now (assuming you aren’t currently terminal). “Morbidity” really has nothing to do with whether they need to continue paying you — you’re already disabled, and further disability won’t relieve them of their obligation to keep paying you. So, we’re really only talking about mortality. Make the case to them that they are being unreasonable in the probability they assign to you dying before their final payment is due, and see if they’ll come up to a more reasonable number.

      Often these so-called mortality assessments the insurers perform are really just an excuse to pay you less. Unless your disabling condition is due to a disease that is expected to result in early mortality (for you, within the next 76 months), there’s really no good reason to reduce your lump sum beyond the 25% they are already taking. If that 25% doesn’t include your odds of dying, then what is the point of it? Reducing your monthly payments to a present value lump sum (as my calculator does) means that paying you that lump sum is the same to them financially as paying you monthly for the next 76 months. The only reason to reduce that number at all is to account for the possibility that they won’t have to make all of the remaining 76 payments. I think a 25% reduction is more than fair to compensate them for the risk of not having to make all of them remaining payments. Asking for an extra reduction on top of that due to mortality risk is just double-dipping — taking two reductions for the same thing.

      Maybe if you negotiate with them using this argument you can get them to offer more, but it may be that they just pulled $80,000.00 out of a hat and manufactured their rationale for offering so little around that number. Unless you are at a heightened risk of death within the next 76 months (or of no longer being disabled), I wouldn’t consider their $80,000.00 to be a reasonable offer. Of course, if you really need the money now, you may not be in a position to reject it.

  10. Paul says:

    Shouldn’t the income/capital gains tax rate affect the calculation? In the case where the monthly payments are tax free, to replace a $1000 payment, $1000 + (income/capital gains) tax must be produced by the lump sum investment (bank deposit/stocks).

    • The discount rate applied is at best a rough estimate of the net income lost by the insurer from paying out the benefits in a lump sum. You’re asking for an impossible amount of precision to be added to that calculation, given that we don’t know whether the insurer would wind up paying capital gains at all after it exploits whatever loopholes, deductions and credits it has available to it.

      I think your mistake is in thinking that the purpose of the calculator is to calculate the present value to the insured, and not the insurer. For purposes of negotiating a settlement, you must view the numbers from the insurer’s point of view — you want to know what the present value of the benefit is to the insurer so that you can apply an appropriate risk reduction (to account for the insured dying or being cut off before benefits are fully paid out) and an extra reduction to incentivize the insurer to make the lump sum pay out. If you only offer to accept the true present value as a lump sum, the insurer has no incentive to make such payment — it may as well just keep making monthly payments.

      Even if we were to view the situation from the standpoint of the value to the insured, you would need to know the percentage of the gains expected, when those gains were realized, and the tax bracket of the insured for all years affected so that you could compare the value of the lump sum to just taking monthly payments. Given the amount of estimating you’d need to do just to determine the amount of the gains the insured would expect, the addition of such variables would not make the calculator any more accurate or useful. Different people are going to land in different tax brackets (with many not owing any taxes on the benefits themselves), and those brackets themselves may change over the benefit period for many insureds (who may have 10, 15 or 20 or more years left on their benefits). This weighs against adding such variables. Given that some of this money may be invested in non-taxable instruments such as Roth IRAs or tax-free municipal bonds, you can see how trying to add such a function to the calculator would be impossible.

      If you had ever negotiated with a disability insurer, you’d know that they’re never going to offer the true present value of an insured’s benefits — so why try to calculate the tax implications of a figure (the present value lump sum figure) that will never be offered? The point of the calculator is just to provide a starting point for settlement negotiations. Whether the final figure arrived at is a good deal for the insured from a tax standpoint requires far too much additional information about the insured’s current and future tax brackets (based on both a lump sum payout and monthly payments), investment plan and anticipated taxable capital gains from such investments to add such functionality to a calculator. There are just too many moving parts and too many additional variables to estimate in trying to individualize such a calculation that it doesn’t seem helpful to try to add it to my calculator.

  11. Nicola says:

    Hello, back in 2009 I was immediately approved (with no need for legal wrangling) for STD and then LTD. However, the job I held prior to disability was 100% commission based. After the STD disability ended, I foolishly tried (and failed at going back to work for about 3-4 months. This big fail resulted in my applying for and receiving the LTD. However, the monthly benefit amount they paid me was based on my final months at work, where I was very much impaired and therefore earned FAR less than previous years. I don’t know why but it never occurred to me that I could do anything about this.
    Now the LTD company has made a settlement offer. Frankly, I am DESTITUTE from living off a VERY low SS disability check and have an overpayment of about $20,000 still due to LTD company so I will not receive a dime more from them for 3 years. Even when I do, the benefit amount per month will only be $579.00 after they subtract the SS disability. I am 47 and my LTD policy only goes til I turn 65 with no COLA. I have permanent chronic progressive medical conditions, but I am not terminal at this time. One, should I consider the settlement offer as stands? It is approx $51,000 but they are subtracting the remaining overpayment of 20,000 so my net is only going to be $31,000. Is it too late or worth pursuing an alteration to my monthly benefit amount based on the fact that they used a time period where I was less than healthy vs the much higher earnings in previous years before I was ill? Thanks!

    • I’m not going to lie and say you have an easy case. You’ve got two big issues to deal with. The first is obviously whether your LTD insurer acted properly in using the time frame of your failed attempt to return to work to calculate your benefits. The second is the timing of your dispute as to the amount — did you wait too long to raise the underpayment issue with the insurer?

      The good news is that some plaintiffs have won cases on each of these issues. You may not. I would strongly suggest consulting with an ERISA LTD lawyer in your area before making any decision about the LTD carrier’s settlement offer. He will be more familiar with the rulings (if any) on these issues in your local circuit and district courts than I am, and (probably after doing some research) should be able to give you a better idea of your odds of success. Just to show you how complicated and technical this can be, the one case I know of off the top of my head dealing with the timing issue ruled against the insurer because it failed to raise the issue of the claim being time barred in its initial response to the insured’s challenge to the benefit amount, which occurred (like yours) years after the benefits started. If the insurer had raised the timing issue in its initial response, the plaintiff might have lost. Who knows how your insurer will respond if you send them a letter challenging the benefit amount? Maybe it won’t raise the timing issue either.

      I think your issues are definitely worth exploring in more detail with a local ERISA lawyer, so don’t just give up without speaking with one or two first.

  12. Nicola says:

    Thanks for your response Robert,
    I realize that mine is a complicated case, far beyond my capabilities to handle myself… so before I take the settlement offer I will take your advice and speak to a local lawyer. I have filled out your referral form so you can set this up. I greatly appreciate your help.

    • I haven’t received your referral request. If you were having trouble getting the form the work, try again, as I just updated several WordPress plugins that were outdated.

      • Nicola says:

        Robert, when I filled it out last night it said it was successfully sent…..but I just did the whole form again….it said that it went thru, so please let me know if it did not. Thanks!

        • O.K. This is weird. I didn’t get your second one either, and when I tested it by filling out the form myself, it went through fine and I got my usual e-mail notification. So, you can either e-mail me your city and state (and nearest major city, if you aren’t in one) at helpme at (remove the spaces and change the “at” to @ — trying to avoid the spambots), or you can leave a comment here with that info. Because all comments are moderated, only you and I will be able to see it (other users can’t see comments that are held in moderation), and I’ll just delete it after I’ve seen your info. Sorry for the inconvenience. Please tell me what OS and browser you are using to help me troubleshoot this. Also, do you use NoScript or some other plugin that disables javascript?

  13. chuck says:

    Has anyone called UNUM and asked for a buyout rather than waiting for offer? I am in a perminant disability situation and dinancially in very bad shape.. I have been collecting from UNUM since September 2012. Do you think it qould be considered at 55 years old?

    • Sure. Clients can initiate talks of a lump-sum settlement with their insurers, and sometimes this will work. Of course, it’s more likely to happen if they propose the idea to you, but you lose nothing by approaching them with the idea.

      The only potential issue I see in your case is the fact that you have been receiving benefits for less than two years. If your policy is like most, in that the first two years of disability are determined by whether you can perform your “own occupation”, and every year after that by whether you can perform “any occupation”, you could face the issue of Unum not wanting to do a lump sum settlement because they plan on challenging your disability from “any occupation” at the two year mark. If your policy is a pure “own occupation” policy (meaning the disability standard never changes to “any occupation”), then a lump sum deal at this point is possible. If your policy does involve the disability definition changing to “any occupation” at the two year mark, you’ll likely have to wait until Unum approves your benefits under that standard before they consider a lump sum settlement at all.

      • chuck says:

        Thanks, well I did ask for a settlement ans they offered one. Not as good as I thought. I get $839 a month qith 113 months left. I figured my value at least $78k. They told me my value presently is $58K and change using a rate of 4.39% they say they are offering me 68% $40,474 to settle I was thinking 68% should be more like $60k am I figuring present value wrong? Thank

        • You’re not figuring the present value wrong. Either their math is wrong, or they are not doing a simple reduction to present value. Some insurers try to further lower their present value figures by claiming that they did an “actuarial assessment” of the claim, taking into account the possibility that you would either recover or die before the full benefits were paid out. I would use the “Generate Report” function of my calculator and print the resulting report to send to them. Ask them to show you their math, and why their 4.39% discount rate results in almost $20,000 less in present value benefits than my calculation. If they then start claiming that it was an actuarial assessment, then you’re really dealing in smoke and mirrors instead of hard numbers. Unless your disabling condition is terminal, there really shouldn’t be any significant reduction in the present value of your claim based on the risk of you dying within the next 9 1/2 years. If they talk about the chance you might recover, note that this is pretty contradictory to their claim that you’re heading to an early grave. Plus, these two possibilities (death or recovery) are the reason they reduce the offer further to 68% of present value. To reduce the present value figure itself using these possibilities and then ask for such a steep reduction to the present value afterward in determining the lump sum offer is just double dipping.

          Keep in mind that they really don’t have to be reasonable in offering you a lump sum. They don’t have to pay it at all. It would be nice, however, if they would just be honest in telling you how they arrived at their figure so you could make an educated decision.

          With respect to the 68% reduction to the present value figure, your math is off — 68% of $78,000 is $53,040, not $60,000. So, assuming the 68% seems fair to you, you’re really only apart by $13,000, not $20,000. That’s something you may be able to compromise about through further talks.

          • chuck says:

            Thank you so much! I may try to get a little more but as you said they sont have ro entertain it at all so they are kind of doing me a favor in offering it in tge first placeat my request. I am not greedy,just in a tough spot. Its a hard decision. Thank you again! You provide a great service here! Chuck

  14. John T. says:

    I am 47 and will continue to receive benefits until age 65. My LTD carrier also provides health insurance for myself and my family. Should the amount they pay for insurance be included in the monthly benefit amount?

    • First, you need to be sure that the LTD carrier is indeed paying your health insurance premiums. Employers who continue their employees’ health insurance while they are receiving LTD benefits do this through a number of ways, so it may not be the LTD carrier itself who is paying the health insurance premium. If you are sure that the LTD carrier is paying the premiums, then it would be fair to include that amount in your monthly benefit when calculating a possible lump sum payout amount. Of course, health insurance rates are not really fixed over time, so it may be tough to account for the increase in premiums year-over-year using my calculator. It would really be a guesstimate at best.

      Alternatively, you could propose a lump-sum buyout of the disability portion alone, with the agreement that the LTD carrier would continue to pay your health insurance premiums (or just provide you with coverage, if it is the same insurer) through age 65. I’m not sure that they’d go for such a suggestion, but it wouldn’t hurt to ask, and it may prompt them to make an offer which includes an amount for health insurance premiums.

  15. Justin says:

    I’ve been in a long term disability claim with Unum for 3 years now. They just sent me a letter offering me a return to work settlement of 170000.00. They want me to submit a return to work plan to them. Now if I send this to them does it give them grounds to deny my claim altogether? On the basis of well if you can do this work etc etc. why can’t you go get a regular job. I have spoke with them and asked for more but they told me I’m not eligible for more cause I’ve only been with them for 3 years. I’m 39 and have benefits til 65. As long as I keep qualifying as disabled. Any input would be greatly appreciated.

    • I suspect that you have a policy with a 3-year “own occupation” period and that you have either now entered, or are about to enter, the “any occupation” phase, where you now must prove that you are disabled from any occupation (subject to it earning you a certain percentage of your previous monthly wage) to keep receiving benefits. I believe you misinterpreted their reason for why their buyout offer seems low — it’s not that you’ve been receiving benefits for only 3 years, it’s that during those 3 years it was far easier for you to prove disability, and now you face a tougher challenge.

      You can bet that Unum has no intention of paying you benefits for another 26 years, so they’re going to try to cut you off at some point. Whether they can really depends on the nature of your disability, how provable your impairments are, and how strongly your doctors support your disability claim. If you think that you’ve got a strong claim for continuing benefits, then this suggestion on their part for you to complete a return to work plan is likely a trap, wherein they hope you will admit to being capable of activities beyond your doctor’s stated restrictions. If you don’t intend to take their buyout offer, it is probably not in your best interest to partake in their return to work program, which is completely voluntary. If you do want to take their buyout offer, or you negotiate them up to a number where you want to take it, then it wouldn’t hurt if they’re also throwing in their RTW services.

      Either way, I wouldn’t be surprised if they try to cut you off in the near future, especially if I’m right about you just entering the “own occupation” period of your policy.

  16. Mi-Mi says:

    I used your calculator and recently submitted a request for consideration of a buyout from my disability carrier. I received a counter offer from them for over 5000 more than I requested. I accepted and have settled my claim. I was hesitant to do this because of fear that they would try to cancel me. The whole process took less than a week from request to deposit. I was surprised how easy and painless it was. I had to settle for a little more than 70% but it is worth it to not have to worry each month that they would terminate my benefits on a whim. I felt I was treated very fairly by the company. It is one of the big ones that usually gets a bad rap in the press and on the net so I must say the higher counter offer shocked me. Thanks for having the calculator handy and for sharing your knowledge.

    • I’m glad to hear that you had such a good experience with settling your claim. If only everyone would have that, I’d be out of a job. ;)

      • Mi-Mi says:

        It would be great if more folks had it this eazy! But there will never be a time when experienced attorneys are not needed. I had a well document 20 year medical history and no self reporting issues because of concrete evidence of my disease process in the form of MRI, CT, surgeries and continual vigilance when following up with my doctors and taking medication as directed. I lived within very stringent physical limitation and never exceeded what was recommended or reported to my insurance. Because I was watched more than once by an agency hired by the ins. co. Every step of my journey was well documented. I also had to deal with quite a few field visits and continual request for information. It was an extremely stressful experience. I would not want anyone to consider going it alone if they do not have a well documented medical case and strong family support. I had to go through a denial of benefits at the two year mark and fight for benefit reinstatement for 5 months before my appeal was accepted and benefits were reinstated. I felt my case was strong but can assure you had I run into continual denials an attorney would have been my first call. I do not recommend going it alone. I know very well I was lucky and blessed. But thanks to your free information I was able to muster the courage to contact them with the request for settlement and they jumped at dumping me! I am satisfied with my settlement and have used it to pay off the mortgage and car payment and with those payments gone I will not notice a loss in monthly income. Thanks again for providing the calculator.

  17. Melissa says:

    Robert, what are your fees associated with taking a claim. I take it fees and costs come out of the settlement amount and not up front to the claimant? I’m 33 and have another possible 32 years on LTD offset by SSD. I used to be a work comp claims adjuster and I know how to evaluate those claims, and I’m trying with mine. But, if I could still do this easily I’d be working and not on disability! I owe them 29K from my back pay and only have 16k to send. They are in a panic that it will take years to get the remaining 13k recouped and brought up settlement. This is with Lincoln financial and honestly, they’ve been a breeze to deal with thus far. In addition to my $1500 SSD, my son gets $750 but that ends in 5 years. As such, they are offsetting his benefits at this time as well. They’re already baiting me with “your condition could change, we might not deem you totally disabled through the term of the claim” blah blah. I keep reminding these guys I used to do this for a living so i know all the tricks and what they are trying to do. I advised I will review a settlement offer but don’t plan on settling a possible 33 years of benefits cheaply! Also, will they push a structure on me? Considering getting counsel to avoid the headache, I have lupus and narcolepsy, I don’t need any added aggravation!

    • Fee structures vary among ERISA attorneys, but most commonly we operate under a sort of “mixed” contingency fee. What I mean by this is that we take the case on a contingency basis and usually ask for the same percentage as personal injury lawyers (usually 33 1/3% – 40%), but we also have to account for the fact that the client may be awarded attorneys fees if we have to sue and we win by getting a judgment. Therefore, the contract will often provide that we will take the greater of (1) the fee percentage based on benefits recovered + court awarded fees and (2) the court awarded fees standing alone. Number two usually only comes into play when a relatively low amount of benefits is at issue.

      The area where ERISA lawyers usually disagree is how to apply their fees to future benefits. Some take issue with taking a percentage of every check for the next 30 years. Some don’t. Some who have a problem with taking a percentage of all future checks have a somewhat inconsistent policy when it comes to lump sum settlements, where they will take their percentage based on the whole amount, even though this is the equivalent to taking a percentage of all future checks. Some will have their contract state that they are entitled to a percentage of all future benefits, but will then let the client off the hook after they feel that they have been fairly compensated for the work the performed. It’s definitely an area where ERISA lawyers have some very strong and differing opinions. I think it mostly comes down to the logistics and bad feeling of taking a percentage from each future check for years and years. While most lawyers don’t see any problem with taking a full percentage out of a lump sum, as this is basically the same as a personal injury lawyer taking a full percentage out of an award of future wage loss (which no one questions morally), it feels differently when you’re taking a little at a time over a long period of time.

      When you are interviewing attorneys in your area, be sure to nail down how they handle their fees with respect to future benefits. Of course, in your case it appears that future benefits are going to be all you recover due to your overpayment issue, so it gets even more complicated. With respect to your question about a structure, I’ve never heard of such a thing happening in an ERISA case. If you’re settling your claim outright, it gets paid as a lump sum.

  18. Ruth says:

    Hi there,
    I have got a quick question: I take I put in the monthly net amount after tax to calculate the net present value? What kind of discount rate does UNUM use at the moment? Is it still 4% or closer to 5%? Does anyone have any experience what their buyout percentages are at the moment?

  19. Carol says:

    I am confused in Melissa’s comment here.


    ” I owe them 29K from my back pay and only have 16k to send. They are in a panic that it will take years to get the remaining 13k recouped and brought up settlement.”

    ” my $1500 SSD, my son gets $750 but that ends in 5 years. As such, they are offsetting his benefits at this time as well. ”

    Is this to say the carrier is actually geting ALL the claimants SSD ( does the Government allow that )

    If that is the case and the carrier has offset the total SSD the claimant receives

    Thats $2,250.00, and in 6 Months the total debt would be paid, and so the writers comment makes no sense to me.

    Why would they feel it would take years to pay the debt back, if they are offsetting the SSD, it would only take 6 Months.

    • You’re confused because you think that the insurer is taking her social security checks. They aren’t. They just stopped sending her LTD checks, with the amount of each check she would have received being offset against the overpayment amount. For example, say her LTD checks were $2,500 per month prior to the social security set-off (the reduction in her LTD benefits by the amount of SS benefits she gets). If she did not owe the insurer anything from an overpayment, her LTD benefits would be reduced to $250 per month for the first 5 years and $1,000 per month thereafter. But, because she owes them $13k, they will pay her monthly benefit back to themselves (at $250 per month) until they reach $13k. That will take years.

      Think of it this way: if I owe you $50/per month under some agreement, but then you do something that makes you owe me $1,500 as a lump sum, if you don’t pay me the $1,500 I’ll just stop sending you your $50/month until I reach $1,500. I’m offsetting my periodic debt to you against your lump-sum debt to me until the lump sum is paid off.

  20. Nancy S says:

    I am 30 years old and currently receive $4,200.00 in disability benefits every month. I have been on disability for almost 30 months. The first two years were an “own-occupation” period and the past 6 months, have been “any occupation” benefits. My condition is not expected to improve and benefits are payable until age 65 (420 months) at which time I will “retire”. I expect an average increase in COLA of 1.5%/year.

    I calculated a lump sum payment of ~$1,165,000 using a discount rate of 4%, however I’d like some advice on how to factor in benefit-paid medical, pharmaceutical and pension contributions.

    I currently use around $2,100.00/month in medical and drug benefits.

    In addition, my plan pays into my employer’s defined-benefit pension plan in the amount $1,125.00/month.

    At age 65 (when my disability plan ends), my pension will be worth ~$130,000.00 annually indexed to inflation.

    Any advice on how to factor in my benefits and pension when calculating a lump sum?

    • The only way I would think that you could try to shoehorn such benefits into the present value calculation would be to estimate their monthly value and run them through separately like you would your regular benefit amount. Of course, certain parts of it will be easier than others, like the pension plan, which is a fixed monthly contribution. The medical and pharmaceutical benefits are a different issue. You don’t say how these benefits are provided. Is your disability insurer (is there even an insurer or is it a self-insured plan?) paying premiums on a health insurance plan? Is this a self-insured health plan? I can’t even say whether this would need to be settled separate and apart from your disability settlement without knowing whether the disability insurer (again, assuming there is one) is the one paying for your continued health benefits. It will also need to handled differently if you’re talking about an insurance policy with premium payments versus a self-funded health plan.

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