How Do Structured Settlements Work?

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Every year in America there are almost 40 million visits paid to physicians because of unintentional injuries.

In many of these cases, the injured person will bring an action for personal injury against the alleged perpetrator of the harm. The settlement of such actions can take a number of forms.

A structured settlement is one of these forms. How does a structured settlement work? Read on as we take a closer look.

How Does a Structured Settlement Work? Everything You Need to Know

A structured settlement can be a complicated process. However, these complications are generally worked out by lawyers and the court. The result is ideally a fairer and more streamlined compensation process for the injured party.

Structured Settlement vs. Lump Sum

Structured settlements are essentially an alternative to lump-sum awards.

Where the court decides that a plaintiff has been wronged and deserves compensation, they might also hold that it would be fairer for the plaintiff to receive this compensation in regular payments over a given period than all at once.

The Annuity

The court appoints a consultant to look after the regular payments once a structured settlement has been decided upon.

This consultant will set up a financial instrument known as an annuity. This annuity is purchased from a life insurance company using your settlement money. 

The annuity is managed by the company in such a way that the money is protected from market shocks or recessions. The injured party receives regular payments of fixed amounts from the annuity.

This system is used because it prevents injured parties from having to regularly interact with the person who wronged them. It is also preferable to entrust the payment of the monies to a neutral third party with financial expertise.

Advantages Of A Structured Settlement

There are many reasons why a structured settlement might be better for a plaintiff than a lump sum.

Most significantly, they encourage fiscal responsibility. Received in one payment, a large lump sum can end up being spent on unnecessary items more quickly than you might think. If you have ongoing medical expenses, this is less than ideal.

A structured settlement will prevent you from spending all your money at once. It is for this reason that structured settlements are more common than lump sums in cases of severe injury.

For some people, structured settlements may not meet their immediate needs. If you want to learn about securing a cash payout for your structured settlement, click here.

Is A Structured Settlement The Right Solution For You?

If you’ve been injured as a result of someone else’s negligence, your compensation may well come in the form of a structured settlement.

How does a structured settlement work, you ask? Put simply, it just means that your compensation will come in the form of regular payments rather than a lump sum.

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