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  • Writer's pictureRobert Schuerger

Making the Right Choice: Should You Choose a Structured Settlement?

When someone gets injured, they might receive compensation as a way to make things right. This settlement can come in two main ways. One is a "lump sum," which means a person gets all the money at once. The other is called a "structured settlement," where they get a part of the money regularly over a certain period of time.


However, how does someone decide which option to choose? Also, why do some insurance companies offer structured settlements while others might offer a lump sum? This article will dive deep into these questions and shed light on how these money options work in real-life situations can how injury attorneys can help navigate the process.


Understanding the Basics of Structured Settlement Payments and Lump Sums


Getting money after a hurtful event can be a relief. Often, this is because of something called a personal injury claim. This claim is like telling the responsible party that they need to fix a mistake they made. Once it's agreed on how much money will fix it, the decision on the payment method comes next. Schuerger Shunnarah Trial Attorneys can advise on questions like does a no-fault claim guarantee a settlement?


Now, there are two common ways to get this compensation. The first is a lump sum payment. Think of it like getting a whole cake at once. Moreover, it's all the settlement money handed over at one time.


On the flip side, there's the structured settlement. Instead of a whole cake, it's like getting a slice every day. These are called periodic payments. Therefore, instead of getting all of the money at once, the injured person receives a bit of it regularly. It's like a scheduled money gift from a life insurance company.

Sometimes, the compensation comes from the victim's insurer or even a defendant's insurance company, especially in personal injury cases. This settlement aims to help the injured person with things such as medical bills.


There are even structured settlement brokers who help set this process up. Whether it's monthly payments or a big payout, each method has its own set of advantages and drawbacks.


Pros and Cons of Both Settlement Types

Pros and Cons of Both Settlement Types


When faced with compensation decisions after an unfortunate event, it's vital to understand the options available. Two primary ways to receive compensation are lump sum payments and structured settlements.


Advantages and Disadvantages of Structured Settlements


Structured settlements, where the compensation is split into regular payments, have their own set of benefits:


  • Steady income: These payments provide a consistent income stream over an agreed period.

  • Financial security: It's harder to misuse money when it's spread out, ensuring long-term financial stability.

  • Tailored plans: Structured settlement annuities can be personalized to meet specific needs, such as medical expenses or unexpected bills.

  • Tax-free: Typically, structured settlement payouts from personal injury cases are tax-free.


On the other hand, there are also some considerations to keep in mind:


  • Inflation impact: Over time, the value of regular payments might decrease as the cost of living increases.

  • Lack of significant capital: Sometimes, an ample investment opportunity might come up, but without a large sum at hand, the victim might miss out on that chance.

  • Dependence on the issuer: If the company handling the structured settlement annuity faces challenges, it might impact the payout frequency or amount.


Advantages and Disadvantages of Lump Sum Payments


After finalizing a settlement agreement, many people might consider the appeal of a lump sum payment. Here's why:


  • Immediate access: The whole settlement amount is accessible immediately, allowing for any pressing financial needs.

  • Complete control: Having all the compensation at once means freedom to use or invest it however deemed best.

  • No waiting: With lump sum payments, there's no waiting period. It's a single, significant transaction.

  • Tax benefits: Some lump sums can be tax-free depending on the nature of the personal injury settlement.


However, receiving all the money at once has its challenges:


  • Potential mismanagement: With a large settlement amount in hand, there's a risk of spending it unwisely or too quickly.

  • Tax complications: A large sum could bump someone into a higher tax bracket, meaning they might pay taxes on other income.


Exploring Real-life Compensation Decisions


Choosing between a lump sum and a structured settlement often depends on personal circumstances and needs. By examining real-life situations, it becomes easier to understand when each option makes the most sense. Let's take two examples (Alex and Jordan) and see how their choices impact their lives.


When Structured Settlements Shine


Alex had a car accident that led to ongoing medical treatments that wouldn't just end in a few weeks. Opting for a structured settlement was a lifeline.


This choice meant regular settlement payments were coming in, helping cover recurring medical and daily living expenses without the stress of rationing a hefty sum.


With the structured settlement, Alex could focus on recovery, knowing the financial aspect is getting sorted for a prolonged period.


Lump Sum Scenario: Making the Most of It


On the other hand, Jordan received a settlement after a slip-and-fall incident. Unlike Alex, Jordan had a one-time surgery and a predictable recovery timeframe. In this situation, deciding on a lump sum settlement seemed ideal.


With the entire settlement funds in hand, Jordan could clear some outstanding debts and even invest some of that money in something beneficial. This single payout provided a fresh financial start, allowing for flexibility in his choices without waiting for periodic payments.


Understanding personal needs and future financial outlook played a crucial role in both scenarios. The choice becomes apparent when the victim's unique circumstances are carefully considered, whether it's the regularity of a structured settlement payout or the immediate financial freedom of a lump sum payout.


How Does Legal Guidance Influence Settlement Choices?

How Does Legal Guidance Influence Settlement Choices?


Navigating the maze of structured settlements might seem straightforward, but every individual's situation can have its complexities.


Legal experts can offer clarity, ensuring that each decision aligns with the individual's best interests. After all, these choices have long-term impacts, and getting them right from the start is essential.

Moreover, seeking advice from professionals such as Schuerger Shunnarah Trial Attorneys can be invaluable for those facing such decisions. They can explain how settlement negotiation works in an injury case.


With its motto, "We go to war for you," victims can feel confident that their interests are protected and advocated for. Victims should remember that knowledgeable guidance is paramount in the realm of settlements.


The Bottom Line


Structured settlements offer a unique way for individuals to receive compensation over time. While they can be beneficial for ensuring regular income, they might not suit everyone's immediate financial needs.

The intricacies of structured settlements demand careful consideration. Each choice can shape the victim's financial landscape for years to come. Therefore, victims should not make light decisions between a lump sum and structured settlements.


Moreover, seeking expert advice can be the difference-maker for those uncertain about the best path forward. Schuerger Shunnarah Trial Attorneys stand ready to offer guidance, ensuring victims make informed decisions about their structured settlements and lump sum payouts.

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