Yes, you should be worried, because as interest rates rise, the value of your full commutation decreases more and more. This is simple math that many people will not grasp. Here is why. With every increase in the interest rates the lump sum of benefits you can receive, will decrease in value because the insurance company can get a higher rate of return on the money they’ve set aside to pay you on a weekly basis.

Consider having to pay someone $100.00 per year for ten years. If interest rates are zero you need $1,000.00 in the bank to pay them $100.00 per year for ten years. At the end of ten years your original $1,000.00 deposit is now zero. But if interest rates are 10% you can put $1,000 in the bank, recieve $100.00 per year in interest payments and at the end of ten years you will still have your original $1,000.00. This is an oversimplification, but it demonstrates my point of the effects of higher interest rates. 

So why not take the weekly compensation payments in one lump sum and put the lump sum in your savings account? That way you get the benefit of higher rates on the lump sum.

Did you understand that statement? Re-read it and then read it again. If you still don’t get it call me and ask me to explain it to you.

This is a difficult concept for the average person and as many times as I have written about it not enough people have called to ask me to explain it to them. 

What are the risks of just getting paid weekly?

First consider the risk that your life-time benefits will stop if you die or remarry.

Risk: Death or remarriage.

If you die or remarry your benefits will stop. What’s the likelihood you will die? Death and taxes are the only two certainties in life. No one receiving a weekly comp check can tell me the day they will die, because death is uncertain. It is the most uncertain think we can try and predict. 

Interest Rate

2.2% Currently

4.2%

6.2%

8.2%

Lump Sum Value

$581,716.21

$442,129.10

$347,443.10

$281,369.32

Loss

$0.00

-$139,587.11

-$234,273.11

-$300,346.89

What difference does it make to my weekly benefit check if I die or remarry?

If you are a widow or widower and die then your benefits will automatically stop; unless you have dependent children related to and were dependent on the worker who died.

What about if I remarry? 

If you get remarried instead of getting the lump sum of a life time of benefits you will receive only two years of benefits in one lump sum. That might be the difference between a few thousand dollars and a few hundred thousand dollars. Which would you rather have in your wallet?

Besides widows and widowers injured workers need to be worried.

What about if I was determined to be permanently totally disabled? What then?

If you are a perm-total then your benefits can be stopped if evidence shows you are no longer permanently and totally disabled. Remember the company doctor and how he tried doing everything to ruin your case? Well he’s still there trying to ruin your case. Remember the nurse case manager, the high-priced spy? Well she’s still actively trying to sink your ship. And if they are successful the day the ruling comes out on a review-reopening decision your benefits stop.

What should I do?

Commute the award to a lump sum and avoid the wrath of death, remarriage and/or someone proving you are no longer disabled.

Do it now before interest rates rise, because as they rise your $400,000 will be turned into a $200,000 claim. What the insurance companies hope is you don’t wake up before then. And trust me they are talking about it. 

SO ACT NOW AND CALL US.

If you read nothing else read this article:

WC: LET US SEE JUST HOW RISING INTEREST RATES REDUCE YOUR LUMP SUM SETTLEMENT

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Steve Lombardi
Iowa personal injury, workers' compensation, motorcycle, quadriplegic, paraplegic, brain injury, death
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