Cashing out your accident benefits
If you have been involved in a car crash in Ontario,
you know a lot more about dealing with insurance companies than perhaps
you would care to. The paper work, phone calls, additional visits to
health professionals, and just generally the number of people poking
around in your life seems endless and overwhelming at times. It
probably occurs to you from time to time that you, or in the case of a
trusted caregiver, someone on your behalf, could do just as good a job
administering the fund of money available for your rehabilitation as
could an even well-intentioned claims examiner. If you are
receiving income benefits, you may wish to avoid the constant fear that
they will “cut you off”, or that you are being watched by surveillance
cameras, investigators, or you may just grow tired of constantly being
called upon to justify your entitlement.
Believe it or not, many insurance companies would like to give you the right to manage your benefits.
What is Cashing Out?
Simply put, the insurance company pays you a
lump sum of money and stops paying any other benefits. The lump sum is intended
to represent an estimate of the amount of money that would be needed to fund
the replacement of the benefits. If you cash out, it is like settling a
lawsuit. It is a one-time once-and-for-all payment; you do not get any more
money from the insurance company for the benefits you have cashed out.
Settlment is regulated by the Insurance Act
regulations which do not permit the settlement of an accident benefits claim
until one year after the car crash.
How does it come up?
The issue is raised either by you or your
insurance company, or by your lawyer if you have one. It most often comes up in
one or some of these situations:
- You have received benefits for a long time and everyone
can comfortably agree that you will continue to do so.
- You are in a dispute with the insurance company and some
form of legal process to resolve the dispute has been started.
- A significant medical opinion about your level of
disability or need has been provided which prompts an evaluation of your future
needs and entitlements.
- The insurance company has an internal policy that prompts
it to desire to close down the file and avoid the costs of keeping it open.
When should I consider
doing this?
Timing:
- When your prognosis is clear and you can logically
determine what you will need in future.
- When you are in a position of strength vis a vis the
insurer, for example if item 3 above occurs.
- When you are in a significant dispute resolution process
with the insurer
- When approached by the insurer
These are just some of the times you would
consider cashing out. There may be others. And considering cashing out does not
mean doing it. Rather, considering means just that. Consider it carefully and
get advice. Keep reading:
Personal Circumstances
You should be able to manage money. If you
are not, you should seek the advice of an investment counsellor who can assist
you in building in safeguards. More about that in a minute. If you are the
caregiver of a person who cannot manage his/her own money, you should see a
lawyer. This is simply unavoidable. The legal process that is involved is very
complicated and requires court approval. You will need a lawyer.
When should I avoid cashing
out?
If you think you just can’t cope with the
insurer any more, and just want to get rid of them, you may not be thinking
properly. That may not be a good time to act. If you don’t yet have a lawyer,
you should not proceed in those circumstances without one.
If the insurer is making the offer early on
in your rehabilitation, and you do not yet fully appreciate what your needs
will be, or cannot make an educated estimate, then be very careful about
considering a cash out. Why take a small sum when there are many years left in
your entitlement?
Some insurers use threats. In effect they
will say: take this settlement or we will send you to doctors, refuse
everything you submit and make you jump through all the hoops we can conjure.
Do not cash out in those circumstances. Again, get a lawyer because you will
need one.
If you are involved in a lawsuit as a result
of your car crash, you simply cannot cash out without first getting legal
advice. Your entitlement to benefits is intricately interwoven into your claims
for compensation in the lawsuit. You can negatively affect the lawsuit if
you make the wrong move with the accident benefit settlement. Once again, you
cannot avoid getting competent legal advice in this circumstance.
How is the right number determined?
This can be a complicated process, or very
straightforward, depending on your circumstances. An experienced lawyer, that
is one who deals with statutory accident benefits as a significant part of his
or her practice, will be able to give you good advice about how to approach
this process. Avoid paralegal services. In my experience they do not have the
sophistication to provide the advice about when and in what circumstances you
should cash out, and do not provide the appropriate evaluations.
Some of the factors that go into the
evaluation are these:
- Your prognosis [to give us an idea of what you will need
in the future]
- What you have used in benefits to date
- The type of impairment and how that impacts the
characterization of the injury for benefit level [catastrophic or not
catastrophic]
- What is your income benefit payment
- How old you are and what your life expectancy is
- Future care plans
- Actuarial or Structure Annuity quotes on the value of
future benefits
- An assessment of what your legal entitlement to
particular benefits may be
- The costs of fighting with the insurer
- The insured’s competence
- Factors relating to the lawsuit against third parties if
any
What advice should I get?
Given the factors outlined above, it is very
clear that you will need:
- Legal advice. I am mindful of the number of times I have
made reference to seeing a lawyer in this article. While it may seem like
promotion of my profession, in this case it is very critical. You are giving up
potential rights, on into the future, and are negotiating with a highly trained
insurance professional with all sorts of resources available to him or her. The
imbalance is significant, and the importance to you is greater and potentially
more far reaching, than it is to the insurer.
- Medical. Your health practitioners are key advisors. How
can you cash out without some idea of what the future holds for you?
- Investment. Once the fund is received, you will need to
know how to invest it to best ensure your needs are met.
What is the process? Are
there any protections for me?
The Insurance Act takes this seriously. A
special Regulation was passed to deal with this situation. Particular
information has to be disclosed to you, and a cooling off period of two
business days is provided for. You can change your mind about any settlement
within that time frame. You must give notice to the insurer and it must be in
writing. If the insurer fails to comply with the Regulation, the settlement may
not be considered valid. The Courts have ruled, in one case, that the
Regulation does not apply, and that is when you are involved in a lawsuit with
an insurer and sign a settlement agreement.
Because of the cooling off period, most
insurers will not pay out the settlement until you have signed all the papers,
they are returned to the insurer, and the two business days have passed.