LTD Settlements: Reinstatement vs Lump Sum

Have you been denied LTD benefits? Or had them cut off? When claimants meet the policy definition of disability, yet continue to be denied benefits, one option is to pursue an insurance settlement. In today’s post, we will explain the two main types of LTD insurance settlements.


This type of settlement is basically what it sounds like: it essentially reinstates the benefits that should have been paid to you in the past. With a reinstatement settlement, you will be paid the benefits that you are owed, up to the present day. (Usually with interest, and part of your legal costs). These past benefits are also known as “arrears”.

After this type of settlement has been paid, the insurer may or may not keep paying you benefits. However, if they do opt to keep paying you benefits into the future, there’s no guarantee that they won’t cut you off down the road.

Lump Sum

With a lump sum settlement (also known as a buyout or a full and final settlement), you receive a single payment that includes past and future benefits, along with interest and legal costs.  Lump sum settlements are the more common type of settlement. Generally, any offsets (other disability benefits) you are receiving, such as from CPP Disability, will be factored into the amount as well.

Calculating the amount of a lump sum settlement is not straightforward, because no one knows what the future might hold. You might recover and be able to resume working and earning an income. You might remain disabled for the long term. Or, or you might not survive. Then there are personal factors, like how old you are and the nature of your disability.

In total, a lump sum settlement may pay less than what you’d earn if you were receiving ongoing benefits. But, there is the benefit of closure for both you and the insurer: you will never have to deal with them again, and they have the assurance that their financial obligation to you is complete.

When you get a settlement, whether it is a lump sum or reinstatement settlement, you must agree that you won’t return to them with another claim.

Working out a settlement is complex. There are a lot of factors in determining which type of settlement is most beneficial for you. There are also taxation implications. And as always, insurers make things just hard enough that many people simply give up. For these reasons, if you’re thinking of pursuing a settlement, you should be working with a lawyer to advocate on your behalf and handle all the communications with the insurer. That is your best bet of a positive outcome.

Please get in touch with us to set up a free consultation, so that we can assist you in getting the compensation you are entitled to.