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Moncks Corner Legal Issues Blog

What is a structured settlement, and should you accept one?

If you file a personal injury claim for an injury you sustained as the result of another person’s negligence, you may find that your claim never makes it to trial. This is not uncommon.

Most personal injury cases settle outside of court during the negotiations process. If you accept a settlement, you agree to discontinue any further legal action in exchange for a guaranteed payment. That payment can come in one of two forms: either as a lump sum or via a structured settlement. FindLaw provides an overview of structured settlements and explores the pros and cons of each.

A brief overview of structured settlements

If you agree to a structured settlement, you agree to receive periodic payments over the course of several years or for the rest of your life. The number of payments you receive depends on the severity of your injuries. Typically, insurance companies and defendants offer structured settlements only in cases of serious and/or permanent injuries.

To pay a structured settlement, the defendant’s insurance company will fund an annuity policy

The pros of structured settlements

A structured settlement can offer several benefits that you may not realize with a lump-sum payment. The main benefits are as follows:

The drawbacks of a structured settlement

Though structured settlements offer several benefits, they do come with a few pitfalls. For instance, many plaintiffs fear that future inflation will render their periodic payments too small. Others realize that structured settlements often cost insurance companies far less than lump-sum payments and, therefore, feel cheated. Finally, the IRS may tax certain parts of a settlement, such as punitive damages, purely emotional damages and attorney fees.

Before you accept any type of settlement, carefully weigh the pros and cons. Also, seek advice from a qualified professional.