Disability Insurance Lump Sum Buyout Options Explained

Author: Disability Attorneys Dell and Schaefer
Published: 16 Apr 2011 - Updated: 11 Jan 2026
Publication Type: Informative

Contents: Synopsis - Introduction - Main - Insights, Updates - Related Publications

Synopsis: This information provides practical guidance on disability insurance policy buyouts, where policyholders receive a single payment in exchange for terminating ongoing monthly benefits. Written by nationwide disability attorneys Dell and Schaefer, the content offers valuable insights for individuals receiving long-term disability payments who may be considering alternative settlement arrangements. The article proves particularly useful to people with disabilities by outlining specific scenarios where lump sum settlements make financial sense - including protection against insurer insolvency, elimination of ongoing documentation requirements, and safeguarding against claim terminations when policies shift from "own occupation" to "any occupation" definitions. Major carriers including Unum, Cigna, Hartford, Prudential, Aetna, and Equitable are identified as companies willing to negotiate buyout agreements, giving readers actionable starting points for exploring this option.*

Introduction

Let's say you have been receiving disability benefit payments from your long-term disability insurance carrier on a monthly basis, but you want to explore the possibility of receiving a lump sum buyout of your disability benefit payments. While a lump sum buyout is not advisable in every situation, there are certain instances in which a lump sum disability policy buyout might be worth considering.

Main Content

A lump sum disability policy buyout is a one-time payment from a disability insurance company in exchange for giving up your disability policy. According to Gregory Dell, a nationwide disability insurance attorney, there are numerous disability companies that will consider disability policy buyouts. Some of the companies that will consider a buyout of a disability policy are Unum, Cigna, Hartford, Prudential, Aetna, and Equitable.

Reasons to Consider a Lump Sum Buyout

Not having to worry about your disability insurance company looking over your shoulder for years to come.

One of the biggest concerns many claimants have regarding their disability insurance carrier has to do with how much the insurance carrier keeps track of the claimant while paying benefits to the claimant. Of course, the disability insurance carrier wants to make sure they are paying benefits for valid claims, so they don't lose money. That's why the disability insurance carrier requires a claimant to file paperwork documenting the validity of the claimants need for ongoing benefit claims.

With a lump sum buyout, there's no need to send in supporting documentation from a treating physician or other medical professionals working in concert with your treating physician to substantiate your need to continue receiving long-term disability benefit payments.

Not having to worry about having your disability insurance benefits denied or terminated.

Time and again, many disability insurance companies deny or terminate disability insurance benefit payments after a period of time specified in a claimant's long-term disability plan that allows the claimant to receive benefit payments as a result of not being able to work at one's "own occupation." Once that initial period has elapsed, a disability insurance company will sometimes terminate disability insurance benefits when the disability insurance company says the claimant can work at "any occupation."

A lump sum buyout can prevent the disability insurance company from denying or terminating a claimant's disability insurance claim once the claimant falls in the category of being able to work at "any occupation." That frees the claimant from falling victim to the disability insurance company, creating undue financial hardship for the claimant.

Having the peace of mind that you received your disability insurance benefits should the disability insurance carrier ever become insolvent.

With the amount of uncertainty that exists in the economy, it's possible for an insurance company to become insolvent and go bankrupt. If such an event occurred while a claimant is receiving monthly disability benefit payments, the claimant would cease to receive such benefits since the pool of money to pay the claimant has dried up.

Naturally, a lump sum buyout is a hedge against an insurance company becoming insolvent. As a result of a lump sum buyout, a claimant will be able to receive some sort of benefits instead of no benefits at all.

Having the ability to invest your lump sum buyout in any manner you wish.

A one-time lump sum policy buyout gives the claimant the opportunity to invest the money in a manner he or she deems fit. Contrary to monthly payments, a lump sum payment doesn't necessarily have to be used for paying the monthly bills. The money from the buyout can be used to bolster retirement savings, ensure that your heirs will be left with something after you die, or serve as a basis for you to move onto the next chapter of your life. In some situations, a claimant may be able to make more money with a lump sum than they would if they waited for payments to come every month.

Remember, though, each situation is different. A lump sum buyout might not be the right course of action for you. Discussing your situation with a disability attorney about the possibility of a lump sum buyout should be your first step. A disability attorney can evaluate your case to determine whether a lump sum buyout of your disability insurance policy is right for you or not.

Insights, Analysis, and Developments

Attribution/Source(s): This quality-reviewed publication was selected for publishing by the editors of Disabled World (DW) due to its relevance to the disability community. Originally authored by Disability Attorneys Dell and Schaefer and published on 16 Apr 2011, this content may have been edited for style, clarity, or brevity.

* Editorial additions by Ian C. Langtree.