One – Agreeing to apply for Residual Disability Benefits rather than Total Long Term Disability Benefits.
Insurers will sometimes convince a claimant to APPLY for Residual (partial) Disability Benefits. If this happens and the claimant, or their lawyer, later takes the position that the claimant was entitled to Total not Residual benefits, the insurer simply responds that a claim for Total was never filed. If the statute of limitations has run to challenge this, it may be too late. The Present Value (PV) of benefits payable under Residual are often hundreds of thousands to millions of dollars less than the PV for Total.
Two – Agreeing to ACCEPT OR COMPROMISE a Residual Benefits decision even if the claim was properly filed for Total. Same problems as above.
Three – Accepting a buy out or global settlement using an inflated discount rate. The discount rate is the percentage by which the total sum of future benefits is reduced to account for the fact that the money is being paid in advance of the dates on which the benefits would otherwise be paid. Use of an inflated discount rate can reduce the PV very substantially.
Four – Failing to take into consideration the existence of a Cost of Living Adjustment (COLA) in the policy in calculating the PV. Because a COLA can completely offset inflation, a COLA can eliminate, and certainly reduce, the need to use a discount rate to reduce the PV at all.
Five – Failing to take into account extra contractual damages to which a claimant may be entitled in situations where a claim was unfairly denied, terminated or underpaid. Extra contractual damages, payable in many states when a claim has been processed unfairly by the insurer, can include losses suffered by the insured from having been forced to sell securities or property to make up for losses caused by the actions of the insurer. In some cases, the insured is also entitled to recover costs, attorneys fees, damages for emotional distress and other losses. These losses can be very substantial and are a proper subject for negotiation in any global settlement.