What You Need To Know Before A Lump-Sum Buyout of A Disability Insurance Policy

If you have been considering a lump-sum buyout of a disability insurance benefits policy, you may be asking yourself whether this even makes sense in your specific situation, and how exactly this process would work for disability insurance policies. Or even more simply: maybe you don’t even fully know what exactly a lump-sum buyout is.

What Is A Lump-Sum Buyout?

Let’s answer the latter first since understanding this term will be the basis of this entire article. A lump-sum buyout needs to be initiated by you as the client. To make this process happen, you need to go up to your insurance company and ask to receive a one-time lump-sum payment of your disability insurance benefits. However, in return, your insurance company requires you to sign away all of your rights under this policy.

This lump-sum payment is made up of all the future disability payments you would have received monthly, which you will now receive all at once in exchange for you releasing your insurance company of the financial liability they previously had to you under this policy. This is why it is referred to as a buyout. The insurance companies buy themselves out of their liability to you.

It should also be noted that lump-sum buyouts are not something you have right to do in Canada. Insurance companies will consider such requests on a case-by-case system, and are absolutely within their rights if they refuse your request.

How To Go About Requesting A Lump-Sum Buyout From Your Insurance Company

Requesting a lump-sum buyout is a matter of negotiation since insurance companies are all about making and saving money wherever they can. What this means for you, as the client making this request, is that you will need to convince them that a lump-sum buyout is playing into their own financial interests. Having a good Personal Injury Lawyer in Waterloo in your corner can help.

Because of this, you will need to be prepared for the sum which will be offered to you, because it will be lower than the actual value of your future benefits, and for good reason. By accepting the request of a lump-sum buyout, the insurance company is taking a risk, regardless of your circumstances. Benefits are only paid to the one actually disabled on a monthly basis for as long as they are alive. The month you die, they start saving the money they would have otherwise needed to pay you. This does not happen in case of lump-sum buyouts. That money is gone, regardless of whether you die tomorrow or in forty, fifty, sixty years.

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