OP has an LTD policy. The issuer has made an offer to cash out the policy for a lump sum payment of 67% of the PV of the contract. OP wonders WHY they would make such an offer and if there is any advantage to his accepting it.
We'd need a TON more info, like:
1 - are you collecting a current benefit NOW?
2 - if so, how long do you think you will continue to collect?
Their requirement that you have a physical makes me think you may not be collecting now, though it is impossible to know that without more info.
The company may be getting out of the LTD market, in which case you could find yourself in bed with a different provider or you could find yourself with no coverage at all. You'll need to check your contract to see what it says about your type of coverage. Some policies allow for a return of premium if you don't use it, some cap your benefit at a dollar amount even when you do use it.
Several possible advantages to you cashing out include:
1 - you'd get a lump sum of money now that you might be able to use to satisfy other obligations thereby making your overall situation more financially stable;
2 - you can invest the lump sum however you wish, which could potentially increase your long term return and cash flow on the money. If you can get a better return than they guarantee you could be better off (MAYBE, who knows);
3 - If you are already disabled and you qualify for Social Security Disability your contract may allow them to reduce their payments to you by any amount you collect from SSA. If you cash out now AND get qualified for Social Security you'd already have their money AND you'd get the SSA money.
The real problem is that NO ONE KNOWS what might happen or what could happen. The best recommendation I can make to you is to sit with a professional who can assess your situation and the offer and give you some focused guidance. The next problem for you is choosing who to sit with - if you're already disabled you'll need to know from your doctor what your chances are of getting SSA Disability, then you'll need to speak to an attorney to see how much it will cost you to fight for SSA (NO ONE gets it the first time they ask, virtually all are denied and have to appeal through the legal process - and then only a small percentage qualify). Once you have this info you'll need someone to review your LTD contract and see what it allows and what it requires.
I have several clients right now who are collecting on LTD and every one of the is being required by the carrier to apply for SSA Disability. In one case the carrier is actually paying for the attorney to represent the client - it is far cheaper for them to pay the different than the whole amount.
Good luck, Gene E. Utterback, EA, RFC, ABA