The cost of litigation is a widely held concern among both claimants and insurance companies. Insurers may use the specter of protracted litigation as a negotiation tool to reach lump sum settlements. Claimants who have been wrongfully denied may be discouraged about pursuing legal action against an insurer because they may believe that they could not afford an experienced attorney.
In light of this, it is important to know how lump sum (or “wash out”) settlements work, and why it is important to have an experienced attorney in these situations.
In a nutshell, a “lump sum” settlement is a single payment that an insurer will make to essentially buy the claimant out of the policy. Such a settlement will release the insurer from its continuing obligation to pay out benefits over the life of the policy.
While a lump sum payment may appear to be wonderful compromise that a claimant should not pass up, these types of offers are not usually made with the claimant’s well-being in mind. A lump sum may be a low-ball offer that does not accurately reflect the actual value of the policy. Nevertheless, an insurer may believe that a claimant will take the money instead of taking the risk of going through litigation to recover what they are rightly entitled to.
This is why a claimant can benefit from the experience and guidance of a disability law attorney. A lawyer can provide important insight into the strengths and weaknesses an insurer may have, which can help in negotiating a favorable settlement.
If you have questions about an insurer’s settlement offer, we invite you to contact us.