If you are injured as a result of someone else’s actions or negligence, you may consider collecting compensation from their insurance company to recoup a number of different expenses. Assuming you have a strong case and a smart lawyer by your side, odds are you’ll be able to work towards a settlement offer. These settlements can come in lump sum form, or as part of a structured settlement. In today’s blog, we take a closer look at structured settlements and talk about their advantages and disadvantages.
The Advantages of a Structured Settlement
Structured settlements definitely have some advantages over a lump sum, but they aren’t always a perfect solution. However, one of the biggest reasons why someone opts for a structured settlement is because it allows them to have guaranteed money coming in for an extended period of time. If your accident has left you unable to work or you can no longer make as much money as you were in the past, it will be nice to have guaranteed money coming in at regular intervals for months or years. This can help give you financial stability during a time when your income levels could be affected as a result of your injuries.
Another benefit to getting paid out over the course of a few years is that it forces you to manage your money a little more responsibly. Many people may not know how to appropriately allocate funds after a financial windfall, but you won’t have to worry about that as much if you get two monthly payments for 10 years instead of one six-figure payment. You’ll still need to be cognizant of your financial situation, but you’ll have less cash on hand to potentially spend haphazardly if you go with a structured settlement.
Other advantages include:
- Potential tax advantages compared to a lump sum.
- Less likely to be approached for money from friends and family.
- You choose the terms by which you’re paid out.
Disadvantages of a Structured Settlement
As we mentioned above, a structured settlement in a personal injury case isn’t always a perfect solution for everyone. One of the biggest complaints we hear for those taking a structured settlement is that they may not have enough money right away to pay outstanding medical bills. Now, you do have some say in developing the structured settlement, and many medical institutions are more than happy to get you on a payment plan as long as you’re gradually working to settle a debt, but you may have more outstanding bills than cash on hand at the outset if you go with a structured settlement compared to a lump sum payment.
Another common drawback of going with a structured settlement is that you don’t have control over how to make that money work for you. A lump sum can be invested and provide greater returns if invested wisely. With a structured settlement, you don’t have access to the funds even though it may be earmarked for you down the road. If you believe you can manage money well and make that money work for you, a structured settlement may not be your best bet.
Finally, it’s also worth noting that structured settlements are rarely altered with respect to payment processes after they are signed and agreed upon. So if you end up in a situation where you need more money right now, it’s unlikely that you will be able to get it from your settlement. Third party services will take a significant portion of your settlement to provide you with advance payments, which will only eat into your award amount. We can’t always predict the future, but if it’s a possibility that you will need your money sooner, work to get more agreeable settlement terms or opt for the lump sum.
If you need help putting together your case, or you want help with the settlement agreement process, reach out to the team at Hey Workers today.
