The Beginner’s Guide to Understanding Structured Settlements

April 3, 2014

The idea of structured settlements was first implemented in personal injury cases. The primary purpose of structured settlements is to provide immediate financial support to accommodate medical treatment, legal payments, promote financial stability and to support a regular income for the rest of the life.

Concept of Structured Settlements

A structured settlement is basically a recurrent payment scheme, as decided between the suitor and the litigant in a legal procedure. You may like to consider the example of a structured settlement arranged between an injured individual and the individual accused of causing it.

On getting assurance to receive regular payments, the petitioner decides to drop the legal case. Therefore, it is possible for the applicant to receive indemnification for the accident/ injury in a manner that makes it easier to pay medical bills for a long period of time. Also, the defendant gets the opportunity to avert an arduous lawsuit. As a result, most of the times arranging a structured settlement leads to satisfactory results for both the applicant and the litigator.

Advantages of Structured Settlements

Since financial compensations can be very high when big industries or corporate are involved, structured settlements can be a good option. This is because in such a case the company does not have to pay a huge sum of money to the applicant at once. However, it must be noted that the amount to be paid in course of a structured settlement is partially higher than the sum that would be paid in a one-off cash settlement.

There are a number of reasons as to why petitioners resort to the policy of structured settlements. Firstly, the claimant can get a better amount of money by virtue of structured settlements when compared to a onetime payment. Secondly, payments received through structured payments do not fall under taxable income. Lastly, structured settlements include the provision for an initial payment of a huge sum of money, which makes it possible to pay medical bills and continue legal suits. Also, the claimant is assured of periodic payments for the rest of his/her life which serve as a bankable source of funds for a lifetime.

Payments made through Structured Settlements

A structured settlement is arranged after a discussion between the claimant and the litigator. The frequency and the amount of each payment can be chosen in any manner as per the agreement between the two parties. One type of arrangement includes the provision for the annual payment of a small sum of money for a certain number of years to the claimant. This serves as a very good choice for those applicants whose health condition does not fluctuate over a long period of time. Another alternative for paying money through structured settlements is to provide a huge amount of money to the petitioner once in every few years. This can be beneficial for those individuals who need to purchase the latest medical apparatus very frequently. Structured settlements can also be designed to provide a lump sum amount at particular times. A good example of this would be to provide funds to an injured child when he opts for higher education, moves out to start afresh and so on and so forth.

As per Alex from, at times structured settlements will not be valid for receiving payments after the death of the petitioner. More often than not this creates a difficult scenario, if the claimant dies prematurely on account of severe injuries after the arrangement of the structured settlement. However, it is possible to decide on a structured settlement such that it will pay the remaining sum of money after the death of the petitioner or in a way that will guarantee the payment of a certain sum through a number of installments.

But it is important to note the fact that once the structured settlement is negotiated, it cannot be altered. So, if your financial needs or medical expenses change after a few years, it will not be possible to accommodate any further changes. It is thus advisable to pay special attention to the policies of the structured settlements, so that not only the present medical and regular needs are addressed but also the future needs are taken care of.

Extra Needs apart from Payments through Structured Settlements

Sometimes, people decide on structured settlements that address the immediate needs only. As a result when the medical needs or personal requirements change after some years, the payment obtained through structured settlements is no longer enough. Such situations may arise when it is mandatory for the claimant to purchase medical equipments that cost very high or to buy the latest vehicle for the handicapped. At times, the petitioner may also demand absolute control over the funds.

Happily for the claimant, it is possible to transform structural settlements to cash reimbursements. Precisely, in such a case the claimant has to sell his rights to the structured settlement to some insurance firm in return for a lump sum amount. By doing this, it is possible to finance immediate needs. Also it is possible for the claimant to invest the lump sum and finally to earn profits through interest of the same. But it must be remembered that chances of losing money are equal in case you want to sell the structured settlements. This is because all insurance companies will earn profits by immediately offering low lump sum amounts. The amount of loss will significantly depend on the market knowledge of the seller and on the scheme offered by the insurance company.