Determining the Worth of a Long-Term Disability Claim - What Factors into the Value of a Claim

Welcome to Season 4, Episode 6 of Winning Isn't Easy.  In this episode, we'll dive into the complicated topic of "Determining the Worth of a Long-Term Disability Claim". 

Host Nancy L. Cavey, a seasoned attorney with extensive experience in disability claims, discusses how the value of a Long-Term Disability claim is determined. The answer to this question - one of the most frequently asked - is comprised of many moving parts and complexities. One might think it is as simple as multiplying the gross amount of your monthly benefits times the number of months of benefit eligibility, but it isn't. To demonstrate, host Nancy L. Cavey will discuss the factors that impact a Long-Term Disability claim's worth.

In this episode, we'll cover the following topics:

1 - How Much Is My Long-Term Disability Claim Worth?

2 - How the Date You Became Disabled Impacts How Much Your Long-Term Disability Claim Is Worth

3 - What Is a Settlement or Buyout of Your Long-Term Disability Policy or Plan Benefits?

Whether you're a claimant, or simply seeking valuable insights into the disability claims landscape, this episode provides essential guidance to help you succeed in your journey. Don't miss it.


Resources Mentioned In This Episode:

LINK TO ROBBED OF YOUR PEACE OF MIND: https://caveylaw.com/get-free-reports/get-disability-book/

LINK TO THE DISABILITY INSURANCE CLAIM SURVIVAL GUIDE FOR PROFESSIONALS: https://caveylaw.com/get-free-reports/disability-insurance-claim-survival-guide-professionals/

FREE CONSULT LINK: https://caveylaw.com/contact-us/


Need Help Today?:

Need help with your Long-Term Disability or ERISA claim? Have questions? Please feel welcome to reach out to use for a FREE consultation. Just mention you listened to our podcast.

Review, like, and give us a thumbs up wherever you are listening to Winning Isn't Easy. We love to see your feedback about our podcast, and it helps us grow and improve.

Please remember that the content shared is for informational purposes only, and should not replace personalized legal advice or guidance from qualified professionals.

Transcript

Speaker A [00:00:15]:
 Hey, I'm Nancy Cave, national ERISA and individual disability attorney. Welcome to winning isn't easy before we get started, I've got to give you a legal disclaimer. This podcast is not legal advice, but nothing will ever prevent me from giving you an easy to understand overview of the disability insurance world, the games the disability carriers play, and what you need to know to get the disability benefits you deserve. So off we go. Frequently I get questions about how much a disability insurance claim might be worth. That's a difficult question to answer, but I'm going to try to walk through it. And today talk about three things that impact the value of a disability insurance claim. So let's first talk generally about how much my long term disability claim is worth, how the date you became disabled impacts how much your long term disability claim is worth, and what a settlement or a buyout of your long term disability policy or plan is.
 
 Speaker A [00:01:14]:
 Okay? All right, let's take a break before we come back have you been robbed.
 
 Speaker B [00:01:20]:
 Of your peace of mind from your disability insurance carrier? You owe it to yourself to get a copy of robbed of your peace of mind, which provides you with everything you need to know about the long term disability claim process. Request your free copy of the book@kvlaw.com today.
 
 Speaker A [00:01:38]:
 Welcome back to winning isn't easy. How much is my long term disability claim worth? Well, it depends. Yes, it depends. One of the first questions I get is how much is my long term disability claim worth? And it's not as simple as multiplying the gross amount of your monthly benefits times the number of months of benefit eligibility. In my opinion, there are eight factors that impact the value of your disability insurance claim. The first one is the date you became disabled. Second, how long the disability policy or plan will pay benefits. Three, whether there is an own occupation disability limit of two years, followed by in any occupation disability period through the life of the policy.
 
 Speaker A [00:02:24]:
 Three, whether there are any limits on how long the policy will pay benefits for mental nervous conditions or subjective medical conditions whether there are any reductions or offsets that will be taken for the receipt of Social Security disability benefits that you or your children might get. Six, whether there are reductions or offsets for any other types of benefits, like a personal injury settlement, workers comp benefits, or any other kind of offsettable income. Seven, your life expectancy based on the disability insurance company's actuarial analysis of your disabling condition. And yes, I know that your grandmother lived to 101, but that's not necessarily how the disability carrier calculates life expectancy and last number eight, the standard of review that a court will use to review a denial of your claim. Got those eight. All right. Another question that I get is, well, should I use an online calculator to determine the value of my case? You got to remember that an online calculator might be a starting point, but it's just an estimate of the value of your claim. It's a rough estimate.
 
 Speaker A [00:03:32]:
 The true and accurate value of your claim can't be determined without an analysis of those eight factors that I just outlined. Many disability carriers aren't in the business of paying out a disability insurance claim for the entire policy period. They're always looking for a reason to deny a claim, and they would create reasons to justify a claim's denial or termination, and that will impact the value of your disability claim. I'm going to next talk about what the disability carrier tools are that will impact the value of your disability case. I call this the disability carrier denial or termination toolbox. There are many tools, and these can all impact the value of your claim. They, for example, may use what's called a paper review where they'll have their doctors, their liar for hire doctors, review your medical records and conclude that you're not disabled or that your restrictions and limitations assigned by your doctor are not supported, or that your complaints of pain are not consistent with your examination findings. They might have a not so independent insurance medical evaluator who is hired for one purpose, and that is to opine that you are capable of working in at least a sedentary capacity and disagreeing with your physician's restrictions and limitations.
 
 Speaker A [00:04:59]:
 And the third factor in the denial or termination toolbox is something called the standard of review, and it's found in the policy. The standard of review can be either arbitrary and capricious or it can be de novo. And if you have an arbitrary and capricious standard of review, that becomes a license for disability carriers to legally deny a claim or terminate benefits. It's a get out of jail free card, and that will impact the value of your file. So these are just some of the denial or termination tools that can impact the value of your case, regardless of the other seven factors that I've mentioned. All right, the next section that I'm going to be talking about is how the date you became disabled impacts how much your claim is worth. And I know that may be strange, but in my view, that's the starting point. Let's take a break.
 
 Speaker A [00:06:12]:
 Welcome back to winning isn't easy. Let's talk about how the date you become disabled, it will impact how much your long term disability claim is worth. In my view, the date you became disabled is the starting point for determining the value of your claim. Many disability policies require that you complete an elimination period before you get started. Now, some elimination periods can be as short as 30 days, 60 days, 90 days, but I've seen elimination periods of over one year. So you have to be disabled this entire period of time based on the definition of disability before you are able to collect dollar one. And if you don't meet the elimination period, you aren't even considered to be disabled regardless of how disabled you might be. Now, another issue is some policies will require that you be totally disabled as that term is defined, or be residually disabled as that term is defined, or will allow a combination of total and residual disability to satisfy the elimination period.
 
 Speaker A [00:07:18]:
 And you've got to understand this because if you go at it wrong, if you are required to be totally disabled and then maybe residually disabled, but you are filing a claim and you're only residually disabled, then you're going to meet the elimination period. Now once you complete the elimination period, the disability carrier is supposed to pay your benefits for as long as you meet the applicable definition of disability. That can be as long as two years, depending on whether there's a mental, nervous, or subjective medical condition limitation in the policy. If you can't do your own occupation or other clauses in the policy that somehow limit the payment of benefits. So now that we kind of know the date you've become disabled, now we know the elimination period, let's look at the other end. And that's how long might they pay benefits? Because this is going to give us what I think of as a basement and a ceiling. Let's get out the terms of your policy and look at them closely because how long the policy or plan requires the payment of benefits is going to depend on what it says. Now, typically, a disability policy or plan will potentially pay benefits to retirement age or life.
 
 Speaker A [00:08:32]:
 You need to get the front several pages of your plan or policy that will describe the elimination period, which is the starting point, and the provisions that describe how long benefits are possible. And this is known generically as something called a declaration sheet or a deck sheet. Now, there's a second document that might help us with the basement and the ceiling, and that's a summary plan description. You can ask your employer or plan sponsor for these documents, and by law they're supposed to provide them to you. By the way, if they don't, they potentially can be subject to a fine of $110 per day and attorneys fees. So let's do some kind of basic math calculations. And these calculations are going to start with the gross amount of benefits from the date a person is disabled, figure out the elimination period when that ended, and then try to figure out the stopping point for disability benefits. Now, I'm going to give you an example.
 
 Speaker A [00:09:26]:
 Let's say your benefits are $5,000 a month. You become disabled on January 1. There's an elimination period of 90 days, and you have 20 years from the date of disability till you reach age 65. That's the basic information that we want to glean from the disability policy or plan. So benefits start April 1, 20 times twelve months at $5,000 is $1.2 million. Now, that's the starting point for the calculation because we know the date you became disabled. We know the elimination period, and we know when the benefits are end. So we know the basement, we know the ceiling.
 
 Speaker A [00:10:08]:
 But that's only the starting point for the calculations. Remember in my eight list item list, laundry list, there were other things that need to be considered. We need to consider, for example, the policy limits. Are there offsets? Are there reductions? Are there limits on how long benefits are paid for certain medical conditions? And, of course, what's your life expectancy? Got it? We'll continue this discussion in a moment. Let's take a break.
 
 Speaker B [00:10:41]:
 Are you a professional with questions about your individual disability policy? You need the disability insurance claim survival guide for professionals. This book gives you a comprehensive understanding of your disability policy with tips and to do's regarding your disability application that will assist you in submitting a winning disability application. This is one you won't want to miss. For the next 24 hours, we are giving away free copies of the disability insurance claim survival guide for professionals. Order yours today@disabilityclaimsforprofessionals.com.
 
 Speaker A [00:11:16]:
 Welcome back to winning isn't easy. Now let's say in that example that I gave you, the case is worth $1.2 million, but benefits are just limited to two years because of a subjective or mental nervous limitation in the policy. That's pretty easy. 5000 times twelve is 60,000, times two is $120,000. That is the starting point for the calculations. But let's say you have Social Security benefits of $3,000 a month. Your case is now worth $2,000 per month times 24 months, or $48,000. So you can see that the policy or plan language can impact the value of the file based on limits in the period of time benefits are paid or offsets or reductions.
 
 Speaker A [00:12:08]:
 Now that we've set the framework, let's talk about another question that I get, and that is, what's a settlement or a buyout? And is it that in my best interest, if the disability carrier has accepted your claim or court has granted your benefits or you are attempting to resolve your case by settlement, you need to understand that the disability carrier is interested in trying to close your file for a price that's right for them. Otherwise, of course, you are going to be stuck sending in attending physician statement forms, activity of daily living forms. They're going to hassle you on a monthly basis. They may put surveillance on you. They may do an ime. Despite the fact that your benefits are supposed to be paid monthly through the life of the policy, they're not interested in paying you those benefits. They want to get rid of you. And you might be thinking it's time to get a divorce from this disability carrier.
 
 Speaker A [00:13:04]:
 I want to settle my case or I want to buy out my benefits. When you settle an ERISA disability claim or an individual disability claim, you're giving up your monthly benefits and your policy through the date of your eligibility in exchange for a lump sum check. The disability carrier plan is buying out the policy benefits. It's a divorce, but it's a divorce that can't be modified. So if you change your mind and decide you want to continue to get your benefits, you're stuck. Now, as part of settlement, you'll be giving up certain rights in exchange for the lump sum. That's going to include the policy, your ability to apply for disability insurance through that particular carrier. You're going to also agree not to say mean and nasty things about them.
 
 Speaker A [00:13:50]:
 You agree to keep the settlement confidential with the exception of disclosing it to tax advisors or financial planners. And you basically agree that if you violate the terms of the confidentiality that you will pay a penalty. The settlement has got to be right for you, given the circumstances of your claim. But many ask me, well, if I do this are the terms of the settlement public record. In fact, the answer is no. If you and the disability carrier agreed to settle the case, the court, if you've got a lawsuit, will simply note that the case has been dismissed with prejudice, which is what you'll be asked to do as part of any settlement. On the other hand, if you're not in litigation, you'll be asked to also sign a release, and that's confidential and private, so there's no public record. Most releases will say you can only disclose the terms of the settlement to your tax preparer or financial planner.
 
 Speaker A [00:14:47]:
 And the only other exception to confidentiality is going to be if you've been subpoenaed to disclose that settlement. If that happens, the release will generally say, look, you've got to give us notice, us the disability carrier, so we can intervene and ask the court to keep this case confidential. Now, if we're in a litigation setting, this case will settle generally at a mediation, and the mediation agreement and the settlement agreement and the release are all going to be confidential. The only thing the mediator is going to tell the court is that the case settled and the terms of the settlement won't be disclosed. The only public record, as I said, is going to be that the case settled and the case was dismissed. Now, as part of the analysis of the value of a case, there's another issue, and that's the issue of whether your benefits or settlement is going to be taxable. Generally speaking, the taxability of an ERISA disability settlement or buyout is considered taxable if you or your employer paid the premium for the coverage with pretax dollars. On the other hand, if you or your employer pay for the coverage with after tax dollars, the benefit or the settlement is not taxable.
 
 Speaker A [00:15:54]:
 Now, I'm not a tax lawyer and I'm not giving you any tax advice. That's something you'll have to talk to your tax preparer or accountant. But I want you to consider that if you live in a state that has state income tax, your settlement or buyout may also be subject to state tax. So obviously, before you try to determine the value of your case or even settle your case, you should be consulting with your tax preparer or tax consultant to get the right answer. Now I will also tell you that when you sign a release of your case, that release is going to clearly say that the disability carrier or the plan isn't giving you any advice as to the taxability of the settlement. It's up to you to figure it out and the release will clearly say that you're responsible for paying both the federal and state taxes. That's not part of the settlement agreement. I hope you have learned about how a case is settled and as you can or valued, and you can see that that determination is personal to you.
 
 Speaker A [00:16:57]:
 And whether or not a case should be settled again is personal to you based on your unique medical situation, the terms of the policy, and of course, the status of your litigation. I hope you've enjoyed this week's episode of Winning. Isn't easy. If you've enjoyed this episode, consider liking our page, leaving a review, or sharing it with your friends and family. I would love it if you would subscribe to this podcast and I want to tell you that we are running our 2022 KVLAW scholarship. It's up and running and we're taking entries until August. Head over to kvlaw.com scholarships to enter. If you know of a deserving college student who needs assistance with paying for their college education, this is the place for you.
 
 Speaker A [00:17:41]:
 I hope you tune in next week for another insightful episode of winning isn't easy.