We are only 2 days away from 1st Qtr. profitability and Unum has been prolific in its offering of settlements. It’s not surprising, and I’m sure quite a few insureds are taking advantage of the offers.
While in the past, I’ve not recommended taking a Unum lump sum settlement, due to economic changes, settlement are a good option. There are a few things that need to be considered before signing on the dotted line, but Unum’s settlement offers are NOT unreasonable given the rates of inflation and increases in the percentage of net present value offered.
First, if your benefit is non-taxable, any settlement receipts represents taxable exclusion of any lump sum payment. If your benefit IS taxable then before accepting a settlement, it’s a good idea to determine how big “the tax hit” will be before accepting it, and whether or not it’s worth it to you.
Next, consider whether you can “afford” the settlement. In theory, lump sum amounts (present value) are intended to be invested to earn the discount rate (future value) over time. Considering that you will need to use 1 month’s benefit (12 in each year), would your investment provide you with enough interest to live on? Given the current rate of inflation, any low risk investment made is likely to provide compounded interest rate incomes better than you think.
Unum does conduct a bit of underwriting before the official settlement offer is made. Yes, be careful, Unum’s first letter says, “MAY offer you a settlement”. But, the good news is, the underwriting form is simple and straightforward. In the past, Unum has been known to reduce settlement amounts $1,000 per $10,000 of offer for certain impairments such as diabetes.
Settlement offers still need to be considered carefully in light of your debt situation and other factors. Once you sign the Settlement Agreement, it is a done deal, you can’t take it back. For some, the realization that regular monthly benefits do not come anymore is scary. But, by and large, Unum settlements today look to be fair deals. If you have any questions, please feel free to give me a call.
