In long-term disability situations, private disability carriers can make offers to buyout coverage so as to avoid having to payout benefits for the lifetime of the policy. When you accept a lump sum buyout, you must agree to forgo legal claims against the insurer for the benefits at-issue (and any related issues, such as a bad faith claim you might have against that insurer for how they mishandled the processing of your benefits). The benefits owed over the lifetime of the policy are negotiated and repackaged as a lump sum payment. If you accept the lump sum buyout, then you will not be entitled to receive monthly benefits payments.
Now, with that out of the way: is it worth it? Though it might seem like an unsatisfactory answer, the truth is that the attractiveness of a lump sum buyout depends on the circumstances of your disability claim and your own preferences.
A lump sum offer for a buyout is less than the total present value of your maximum future benefits under your disability insurance policy. Whether or not the offer for a buyout is reasonable or “worth it” for you to accept requires complicated analysis. For one thing, disability insurance benefits are not static in nature. The insurer may conduct surveillance over time, and will absolutely expect you to update them on changes in your medical condition(s), your continued medical treatment, and any efforts to return to work. It is in the insurer’s best interest for you to improve and therefore to no longer be “disabled” under their policy, thus terminating the receipt of benefits. By negotiating a lump sum buyout, you don’t have to worry about whether the insurer will terminate your benefits at some later date — you can focus on recovery.