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How Do I Use the Long Term Disability Benefits Calculator?

 

To use the Long Term Disability Benefits Calculator, you’ll need two key pieces of information: the amount of your net long term disability benefit (after any offsets) and the number of months you expect to continue receiving benefits. The calculator will then apply a discount rate to estimate the net present value (what your future monthly payments are worth in a single lump sum today).

Here’s how to use the calculator step-by-step:

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• Enter your monthly net benefit: This is the amount you actually receive after any applicable reductions. Your long term disability benefit may be reduced by offsets such as Social Security Disability Insurance (“SSDI”), Workers’ Compensation, or other income. It may also be reduced by taxes if your benefit is taxable. Make sure to input the amount you actually receive each month.

• Choose a discount rate: The calculator will apply a discount rate to account for the time value of money. If you’re unsure what to use, start with a rate between 3% and 5%. This reflects a conservative return you might expect from safe investments. A higher discount rate results in a lower present value and vice versa.

• Enter the interest rate on past due benefits: Enter the statutory interest rate for your jurisdiction (e.g., 9% in New York under CPLR § 5004). This applies simple interest to any benefits you were owed in the past but didn’t receive.

• Select your back benefit start date: This is the date your benefits first became past due (usually the date your insurance company stopped paying you). The calculator will use this to determine how many months of missed payments you may be owed, and to calculate any applicable interest.

• Select your proposed date of settlement: This is the date you expect to settle your claim with your insurance company’s lump sum offer. The calculator will use this to divide your benefits into past and future amounts, allowing for separate calculations of interest (on past due benefits) and discounting (on future benefits).

• Select your future benefit end date: This is the date your long term disability benefits are scheduled to end under your policy. For many claimants, this is the date you turn 65 or reach your Social Security retirement age, but it will depend on the specific terms of your policy. Entering this date helps the calculator determine how many months of future benefits remain.

 

Note that this calculator offers a simplified estimate and does not factor in cost-of-living adjustments (“COLAs”) or changes in your benefit amount over time. If your situation involves more complex variables or if you’ve received a lump sum offer, it’s wise to consult a long term disability attorney or financial advisor for personalized guidance.

 

What Discount Rate Should I Use?

 

Choosing a discount rate is one of the most important—and most subjective—parts of calculating the net present value of your long term disability benefits. The discount rate reflects how much more valuable money is to you today than in the future. In other words, it’s the rate at which you “discount” future payments when determining their value today.

 

There’s no one-size-fits-all answer, but here are some common approaches:

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• Start with 3% to 5%: This is a reasonable range for most conservative investments, like high-quality corporate bonds or long-term Treasury securities. Using a 3% discount rate will result in a higher present value than using a 5% rate because you’re assuming a lower rate of return from alternative investments.

• Use what insurers use: Insurance companies often use a rate published by Moody’s Investors Service, which reflects the average yield on seasoned corporate bonds. This rate is published monthly by the National Association of Insurance Commissioners (NAIC) and is commonly used in settlement negotiations. You can find it here: https://content.naic.org/research_moody.htm.

• Consider your own investment options: If you expect to invest a lump sum yourself, ask: What return could I reasonably expect? If you plan to use the money to pay off high-interest debt—like credit cards with a 15% interest rate—then the value of a lump sum might be much higher to you than it would be for someone who could only earn 2% on a savings account.

• Factor in inflation and risk: A lower discount rate may be more appropriate if you’re risk-averse or uncertain about future investment opportunities. A higher rate assumes more aggressive growth and more risk.

 

In general, if you’re using the calculator to get a conservative estimate of what your benefits are worth, a rate between 3% and 5% is a good starting point. For settlement negotiations, an attorney can help assess whether a higher or lower rate is more appropriate based on current market conditions, your personal financial goals, and how your insurance company is valuing your claim.

 

What Is the Interest Rate on Past Due Benefits?

 

The interest rate on past due long term disability benefits is used to calculate the additional compensation you may be owed if your insurance company wrongfully withheld payments that should have already been made. This typically comes into play in litigation, not appeals, and the applicable rate depends on the laws of your state and the circumstances of your case.

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Here’s what you should know:

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• Interest usually applies in litigation, not appeals: If your claim was wrongfully terminated and you’re successful in appealing, you generally won’t receive interest on the unpaid benefits. However, if you file a lawsuit and win, the court may award interest on the past due benefits—especially if your insurance company acted in bad faith or caused unreasonable delays.

• The interest rate varies by jurisdiction: Many states set a statutory interest rate on unpaid judgments. For example, in New York, the statutory interest rate is 9% simple interest under CPLR § 5004. This means interest is not compounded; it accrues only on the original unpaid amount, not on prior interest.

• Interest may be negotiated or litigated: If your case settles before trial, interest on past due benefits may be part of the negotiation. Some insurers will offer interest to incentivize a settlement, while others may resist. If your case goes to trial, the court may determine whether and how much interest you’re owed.

• Contractual interest may also apply: Some disability insurance policies include provisions for interest on late payments, although this is rare. If your policy includes such a clause, that rate may apply instead of a statutory one.

 

For example, if you were owed $50,000 in benefits for a period when your insurer wrongfully terminated your claim and your state’s statutory interest rate is 9%, you could be entitled to an additional $4,500 per year in interest.

 

If you believe your benefits were wrongfully withheld, it’s important to speak with an attorney. A disability insurance lawyer can help you assess whether interest is available in your case, what rate might apply, and how to best pursue the full amount you’re owed.

 

Should I Accept a Lump Sum Buyout of My Disability Claim?

 

Accepting a lump sum buyout of your long term disability claim is a major decision—and one that should not be taken lightly. In most cases, you should not accept a buyout without first consulting a long term disability attorney. These offers are made in your insurance company’s best interest, not yours, and they often undervalue what your future benefits are truly worth.

 

Here are some key points to consider:

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• Never request a buyout: While it might be tempting to approach your insurer about a settlement, doing so can backfire. A buyout request signals to your insurance company that something has changed—like an improvement in your condition or a plan to return to work. Even if that’s not the case, your insurer may use your request as an excuse to reexamine or terminate your claim.

• Let your insurer make the first move: If your insurance company voluntarily offers you a buyout, it’s time to pause and seek legal advice. That offer means they’re hoping to save money by settling your claim early—and the first offer is rarely their best.

• Know your numbers before deciding: The buyout amount will likely be based on a discounted estimate of your future benefits. You’ll want to calculate the net present value of your remaining payments and compare that to the lump sum you’re being offered. If the offer falls short—and it often does—you may be able to negotiate for more.

• Remember that accepting a buyout ends your claim permanently: Once you agree to a lump sum settlement, your monthly benefits will stop. You can’t reopen the claim later, even if your condition worsens. That’s why it’s so important to fully evaluate your financial and medical situation before agreeing to a buyout.

 

Because of the legal and financial complexity involved, you should always speak with a disability insurance attorney before accepting any lump sum settlement. An attorney can review the offer, analyze whether it reflects the true value of your benefits, and help you negotiate for a better deal.

 

What Factors Should I Consider Before Accepting a Buyout?

 

Before accepting a buyout from your long term disability insurance company, it’s essential to evaluate your personal and financial circumstances carefully. A buyout ends your monthly benefits permanently, so you need to be confident that a lump sum is in your best interest—not just convenient in the short term.

 

Here are key factors to consider:

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• The value of the offer: Compare the lump sum to the net present value of the benefits you would receive if you remained on claim. Is the buyout fair? Or is your insurance company trying to save money at your expense? A lower-than-fair offer may leave you underfunded over time.

• The hassle of ongoing monitoring: Are you tired of repeatedly submitting forms, undergoing insurance exams, or having your claim scrutinized? If dealing with your insurance company is draining or you’re paying a law firm to manage the process, you might factor those costs into your decision.

• Your investment or financial opportunities: Would a lump sum give you the chance to invest in something meaningful? For instance, paying off high-interest credit card debt, making a necessary home modification, or placing funds into a conservative investment account could make a buyout more attractive.

• Your medical outlook: Do you expect your condition to improve over time, or is your disability likely to be permanent? If you believe you may recover or return to work before your benefits run out, accepting a slightly lower lump sum might make sense. On the other hand, if your condition is stable or worsening, you may be better off staying on claim.

• Your life expectancy: If your condition reduces your life expectancy, you may prefer the security of having a lump sum now. But if your condition is not life-limiting, continuing to receive steady monthly benefits may provide greater overall value.

• The risk of future termination: Some claimants accept a buyout because they worry their insurance company will try to terminate their claim again. While that concern is valid, it’s also one of the reasons to consult an experienced attorney—especially if you have a strong claim and your insurer’s tactics can be challenged.

 

Every situation is different, which is why we strongly recommend reviewing any buyout offer with a trusted long term disability attorney. An attorney can help you assess your financial and medical picture, negotiate a higher settlement if appropriate, and ensure you’re making the decision that best protects your future.

 

Need Help Valuing Your Claim or Negotiating a Buyout?

 

The Maddox Firm can:

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• Review your insurance policy and explain your net benefit: We’ll examine the specific terms of your long term disability policy (including benefit duration, offsets, exclusions, and cost-of-living adjustments) to help you understand exactly how much you’re entitled to receive now and in the future.

• Advise you whether a buyout offer is fair: Using your policy details and financial data, we’ll calculate the net present value of your remaining benefits and compare it to your insurer’s offer. If the amount falls short, we’ll help you decide whether it’s worth pushing back.

• Handle negotiations with your insurance company: If a buyout offer is on the table, we’ll communicate directly with your insurance company on your behalf, working to increase the lump sum and protect your financial future. Our goal is to secure the best possible outcome for you.

• Assist with appeals or litigation if your benefits are terminated: If your insurer has stopped paying your claim, we’ll fight to get your benefits reinstated through a strategic appeal or, if necessary, by filing a lawsuit. We’ll also pursue interest on past due benefits where available and ensure you’re treated fairly under the law.​

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A short term disability or long term disability claim can be a complicated process.  If you need help during the claims process, with appealing a claim denial, or with litigating a final adverse short term or long term disability decision, The Maddox Firm can help.  The experienced team at The Maddox Firm will examine your insurance policy, correspondence from your insurance company, medical records, and any other relevant documentation in order to give you personalized guidance on how we can help you win your short and/or long term disability claim.  Our New Jersey and New York long term disability attorneys help clients nationwide.

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Contact us to help you file your claim, appeal, or litigation the right way.