If you are receiving an award of workers’ compensation benefits from either a settlement or a hearing award you need to read and understand what I am about to tell you. If you learn nothing else this year take the time to learn what I am about to share.

Here is what every Iowa workers’ compensation injured worker needs to know: The value of your lump sum settlement is about to get halved.

Here is why – INTEREST RATES ARE GOING TO RISE, THEY HAVE TO BECAUSE THEY ARE AT HISTORIC LOWS AND CAN’T STAY THERE FOREVER. When the rates rise the value of your lump sum settlement goes down. In other words, as interest rates rise what you can get paid in one lump sum decreases.

Many widows, widowers and other workers’ compensation recipients with lifetime or even long-term benefits are about to get a lesson in what it means when interest rates rise.

Short Answer: The higher interest rates go the lower the value of any lump sum settlement. In Iowa a lump sum settlement is known as a commutation of your benefits. It is a way of turning a stream of benefit income into one lump sum payment. In finance they refer to this as capitalizing the income stream. For lay people it simply means you are about to get taken to the cleaners.

Let me give you an example. I will need to assume you, Joe or Shirley Schmmo is receiving lifetime weekly compensation under the Iowa workers compensation benefits system and you would like a lump sum to cash out and stop the insurance company and its lawyers from following you around (surveillance) and asking your neighbors what you do when they aren’t around. You will need a lawyer and so you meet with one (Lombardi Law Firm) to find out how much you can get in a lump sum. If that meeting took place in a year from now that would mean a lump sum amount would likely be determine two years from now. In two years the interest rates (constant treasury today is .2%) is likely to be a lot higher. However much higher it gets will matter to you then because the dollars you receive then will be a lot less than they are today. (See the chart below.)

Caveat Emptor: If you don’t understand what I am trying to explain then you have an option. Call my office (515-222-1110 or [email protected]) and schedule an appointment so I can explain to you what the insurance companies don’t want you to know and what they won’t let the adjusters tell you. Acting before interest rates rise can make your settlement worth hundreds of thousands of dollars more. See below!

And if you are receiving lifetime benefits and intend to get married call me now! Don’t wait because it will cost you more money than you can make in ten years. I mean it! Call now! I will not charge you just to find out what it is I am talking about in this blog.

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

Let me make some assumptions for the purpose of proving my point. Assume the worker who either died or is currently receiving a life-time weekly benefit is 49 years old and is a man. Let’s assume his weekly benefit amount is $475.00. And then let’s assume a normal life expectancy. Now let’s see what happens to the value of that lump sum award as the interest rates rise.

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

Do you hear the sound of water circling the drain? That sucking sound is money being drained out of your pocket and into the insurance company’s float account. Steve Lombardi, Attorney

And why does this make any difference to you? It makes a difference because you can control the investment rather than a simple weekly workers’ compensation check. You can take the money and go buy an annuity or invest in the financial markets with long term bonds and mix in some stocks while leaving something to your heirs. If you die while receiving workers’ compensation benefits the weekly check stops. But if you settle and purchase an annuity it will continue to pay your children or significant other even if you pass on. There are many options you should consider if you have long-term weekly benefits under Iowa’s workers’ compensation system. And don’t expect the insurance industry to treat your fairly because from their standpoint it has nothing to do with fairness.

Don't let the insurance industry take your case to the cleaners, call now! 515-222-1110 Iowa Workers' Compensation Lawyer

2009 United States Life Tables, 2009, National Vital Statistics Reports, Volume 62, Number 7

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