Settling a long-term disability (LTD) claim is often more complex than it first appears. Most people naturally focus on the settlement amount, since that is the most visible part of the agreement. However, every settlement also includes additional terms that define what rights are being resolved and what both sides agree to moving forward.
At first glance, these provisions can feel overwhelming or overly technical. In reality, they are a standard part of resolving an insurance claim. While they are important to review carefully, they usually do not take away from the main benefit of settling, which is bringing the claim to a close on agreed terms.
A well-negotiated settlement can provide financial certainty, closure, and peace of mind. The key is understanding what the agreement actually says so you can move forward confidently, knowing exactly what you are agreeing to and why it matters.
Buy-Outs vs. Litigation Settlements
When people talk about “settlements” there can be a couple of different outcomes that they are actually referring to.
A policy buy-out typically happens when a claim is approved and the insurer wants to pay a lump sum instead of paying out the rest of the benefits on a monthly basis. In this case, agreements are often short, with straightforward provisions about payment and waiver of future benefits and potentially confidentiality.
In contrast, a settlement during the litigation process (after a claim has been denied and the denial has been upheld on appeal), are common. These settlements resolve both the lawsuit and future policy obligations. In this case, the terms of the agreement generally include extra details, and often include:
- Dismissal of the court case
- “No admission of liability,”
- Tighter confidentiality
- Non-disparagement
- Waiver of future coverage with the insurer
Below is more information about what some of these terms mean.
Common Settlement Terms and What They Mean
Waiver of Future Coverage
- What the term usually says: You can’t claim future benefits with the insurer, even if your health worsens. This term also usually prevents you from obtaining coverage under another policy with the same insurer if you return to work in the future..
- Why settlement can still make sense: In exchange for giving up future benefits, you’re receiving a lump sum that provides a portion of value of those benefits today, with the advantage of avoiding the risk of denial or ongoing battles with the insurer.
- When to be cautious: If you have returned to work with the same employer or expect to return to work in the future, this is a point that should be negotiated. Otherwise, you could end up in a situation where you are unable to get covered under a policy with the insurer again, even if your prior medical condition resolved and you returned to work. The insurer might agree to only waive future coverage for the same medical conditions or provide a “cooling off period” indicating that you can’t file a claim within the next 1-2 years.
Confidentiality and Non-Disparagement
- What the term usually says: You agree not to disclose the settlement amount, the terms, or details about the claim to anyone outside a very limited group, often just your attorney, accountant, or spouse. Non-disparagement clauses prevent negative statements about the insurer or the settlement.
- Why it matters: This term generally means that you cannot talk about the settlement or make negative comments about the insurer with coworkers, friends, or on social media. These clauses are broader than most people expect.
- Why settlement can still make sense: While these clauses limit public discussion, they don’t affect your finances or benefits. Most clients find the trade-off acceptable for the certainty and closure they gain.
No Admission of Liability
- What the term usually says: The insurer does not admit any wrongdoing or liability in connection with the claim or its handling.
- Why settlement can still make sense: This language does not affect your payment or benefits. It is included in almost every settlement across various areas of law and is not a reflection of the merits of your case.
Release of Claims (Beyond the Policy)
- What the term usually says: In some cases, particularly where disability coverage is provided through an employer or a self-funded plan (meaning the employer is the one actually paying the benefits), the agreement may include a general release of claims. This can extend beyond the disability policy and may require you to release potential employment-related claims, such as discrimination, retaliation, or wage disputes.
- Why it matters: A broad release can waive legal claims that are unrelated to the disability policy itself and that you may not have intended to include in the settlement.
- Why settlement can still make sense: If you are not pursuing any other employment-related claims or wish to resolve all claims together, agreeing to a broader release may help facilitate a higher settlement amount and allow for a fully resolved case for both sides.
- When to be cautious: If you have another pending or potential claim against your employer, you should be extremely cautious when evaluating this type of term. Depending on the circumstances, it may be appropriate to negotiate the scope of the release or address those claims separately. Ideally this scope of the release will have been addressed between the parties before the settlement is finalized.
Why These Clauses Exist
Insurance companies use settlement provisions to create closure and predictability. Once a claim is resolved, they want clear terms that fully end the dispute and prevent any future obligations or disagreements. For claimants, these provisions can feel restrictive when first read. In most cases, however, they do not meaningfully limit day-to-day life or future plans. Instead, they primarily function to define the scope of the settlement and confirm that the claim has been fully resolved. Knowing that these terms are common at the outset can help you enter settlement discussions with a full understanding of what is likely to come.
Takeaway
An LTD settlement isn’t just about the amount of money being paid. It is also about understanding the terms that come with it and what rights are being resolved in exchange. While some of the language can seem intimidating, these provisions are standard in most settlements and, in many cases, do not change the practical benefits of resolving a claim.
A fair settlement offers what many clients value most: financial certainty, a clean break from the insurance process, and the ability to move forward without continued disputes or uncertainty.
If you are considering a settlement, whether through a policy buy-out or after litigation, an experienced LTD attorney can walk you through each provision in plain language and help ensure the agreement is fair and fully understood before you sign. Contact our office today to speak with a member of our LTD team.