Most personal injury cases settle with a single lump sum payment. A lump sum means that you, the plaintiff, receives a one-time payment from the defendant, which settles your case.
In some instances, a plaintiff might receive a structured settlement from the defendant. Structured settlements involve payments of the settlement over time for years until the full settlement completes itself. Typically, the structured settlement includes partial payments to the plaintiff and his or her attorney upfront, then remaining payments distributed to the plaintiff over a few years. In some cases, structured payments continue for the plaintiff’s entire life.
Why Do Structured Settlements Exist?
The structured settlement process helps defendants pay large settlements over time, and provides the plaintiff with a steady stream of income. The plaintiff and defendant agree to structured settlements. Once the agreement is made, the defendant and his or her insurance company transfer a portion of the agreed compensation to a company that specializes in annuity-based payments.
The Payout Process of a Structured Settlement
- Initial Upfront Payment – The upfront initial payment is the largest and takes care of past bills that have accumulated over time. Also, this amount might pay the attorney who represents the plaintiff in the personal injury claim to satisfy that debt immediately.
- Extraordinary Expense Payments – Settlements might provide annual income to the plaintiff, with additional allotments in place in case the plaintiff requires extra income one year for an unexpected expense.
- Increasing Payments Over Time – As the structure moves forward, the plaintiff steps up his or her payments over the years, ending with higher compensation values.
- Decreasing Payments Over Time – Other times, the plaintiff might opt for reducing payments over time, with the largest volume of payments at the start of the structure.
- Delayed Payments – Some plaintiffs choose to delay payments until retirement, or a few years after the initial upfront payment, to spread out compensation.
The Advantages and Disadvantages of Structured Settlements
Only you, the plaintiff, can decide if a structured settlement is right for you. Naturally, you must consult with your attorney to see if the structured settlement is in your best interest and how it affects your financial situation over time.
There are fundamental advantages to the lump sum method too, including:
- You get all money owed to you immediately.
- You do not wait to receive full compensation.
- You do not worry about the insurance company that handles payments going out of business.
There are advantages to the structured settlement, including:
- Larger settlements are harder to manage; therefore, slow, steady payments ensure better money management.
- You may save on taxes, especially if you invest the funds from your personal injury settlement and receive returns.
Which is Right for You?
Lump sum payments are the traditional way to satisfy personal injury claims. Numerous factors affect the stability of a structured settlement; often, plaintiffs find the disadvantages outweigh the benefits in such arrangements. However, only you can decide what is best. If you have a low-value settlement, a lump sum is often recommended. If you have a high-value case, your attorney might suggest the structured option.
To explore your options and understand how personal injury compensation works, sit down with Clarke Nash for a free, no-obligation consultation. Schedule yours today by calling his office at 912-200-5292 or request more information online.