Sometime ago I wrote a lengthy brochure regarding disability claim settlements and although it initially received some attention, during COVID, interest on the subject seemed to fade away. However, the subject of insurance settlement is back on the table for Unum, and there are insureds who are making a few pretty big mistakes.
To begin, my settlement book is on my website for free. You can buy it, or download it free of charge, depending on how you wish to contribute back to DCS. Nevertheless, I strongly suggest that you read it, if you’re considering an insurance settlement. Please note that no other insurance company actively offers settlements on a regular basis except for Unum Group. In other words, there is no organized departmental “settlement department” in any company except for Unum. Unum has always used “settlements” as risk management, other insurers have not. That is not to say, that other companies such as The Hartford don’t offer settlements, they do, but rarely and sporadically.
Although it might seem a perfect solution to consider lump sum settlements right now for short-term monetary gains, it probably isn’t. Every investor should already know that it is not advisable to use, liquify, or dispose of long-term assets to pay for short-term debt. It’s compared to buying a pack of gum with a credit card. While it might be tempting to sell-off claim liability to pay debts now, insureds may regret that decision in the years to come.
Disability claim income is more than just “monthly benefits.”
- Disability income is a buffer against future debt and the settling of obligations that pay for assets, such as a home, or other property. This incomes property taxes.
- Disability income balances other sources of income such as SSDI, Dividend or Interest income, odd jobs, or future debts.
- Disability income provides resources that supply medications in addition to health care.
- Future disability income may pay for home health care, retirement care, and other “old age” living expenses.
Currently, insureds are headed toward the end of the 1st Qtr. profitability results when insurers are doubling down to recover any end-of-the-year losses incurred. “Settlement” is clearly an option to reduce financial reserves and the company may in fact be offering settlements. However, while lump sum settlement funds are intended to be invested today in order to earn “future value” at maximum duration, it is doubtful given the current state of our economy that “invested money today will earn future value. In fact, it’s darned likely to be a whopping loss! The present value of funds today will not be available to pay off future expenses.
Let me emphasize that each insured’s financial situation is different and decisions should be based on individual circumstances, not at the persuasion of a very clever Unum settlement specialist. “Needing money” should only be one consideration in your decision-making, not the only reason.
Frankly put, in my opinion, given the current investment situations in the US, this may not be the best time to “risk” insurance settlements. I’m sure there are differing opinions, such as the insured who says, “I know the economy is bad, but why shouldn’t I cash in now, take what I can get and use my money to benefit me while I still can? After all, money is more valuable when spent today and not saved.” There is some truth to this argument, and for some insureds, it would be a good reason for accepting settlement.
Disability claim settlements are called, “compromise settlements” and are NOT negotiated to any great extent. Many insureds think they are going to be very clever and haggle with Unum until they get what they want. There is a big difference between a “compromise settlement” and a settlement negotiated on the courthouse steps during litigation. Claim settlements are most often withdrawn by Unum when insureds, or their lawyers, attempt to negotiate significantly more than what was offered.
My suggestion is to consider disability claim settlements very carefully to determine if a lump sum will satisfy all of your future financial goals and objectives. It’s OK to refuse settlement, as long as you realize when you refuse, your claims are returned to the risk management barrel. It’s. not retribution for not taking the settlement, just a return to the “risk management” status quo.
