Why Many Injured Claimants Choose Structured Settlements Over Lump Sums
Injured claimants pursuing their options for receiving compensation may want to consider structured settlement annuities. Rather than receiving a lump sum payout, structuring the financial recovery offers security, tax-free growth, and safety from fluctuating markets.
Options for Receiving Compensation in an Injury Case
In civil cases, such as personal injury, workers’ compensation, medical malpractice, and wrongful death, the claimant may be entitled to compensation for medical expenses, lost wages, and other damages from the at-fault party (or the at-fault party’s insurance company). Claimants typically have two ways to obtain financial recovery: they can negotiate a settlement with the insurer or receive a favorable verdict from a judge or jury in court.
Once it’s determined that the claimant should receive compensation, the claimant has two options to receive the award. They can get a lump sum payment. With this option, the claimant would receive the money they are entitled to immediately.
However, an alternative (and often more beneficial) option is available: a structured settlement. In contrast to a lump sum payment, the claimant would receive periodic payments for an agreed-upon amount and length of time.
The Advantages of Choosing a Structured Settlement
Choosing a structured settlement over a lump sum offers numerous advantages for injured claimants.
Below are a few of the benefits:
- Security: Structured settlements provide a long-term source of tax-free income. Often, when claimants receive lump sum payments, they quickly spend the money. With regular payments over time, claimants can spread out the compensation and have guaranteed1 income in the future.
- Flexibility: The claimant and at-fault party can arrange for payments to be made for a certain amount and for a specific period. Depending on the annuity issuer, the claimant could also choose to start the payments right away or defer them.
- Safety: Structured settlement annuities are one of the safest financial tools available. They have a locked-in rate of return unaffected by fluctuations in the market.
- Tax benefits: Whereas interest growth on lump sum cash payments may be taxable, those received from a structured settlement annuity are exempt from state and federal taxes.
The Process for Receiving a Structured Settlement
Receiving a structured settlement is a process that begins when an accident victim decides to pursue a claim against a defendant. If the claimant is awarded compensation, both parties must agree to allow structured settlement payments before finalizing the settlement.
The structured settlement agreement should contain terms such as:
- How the compensation will be paid,
- When the payments will begin, and
- When the payments will end.
The defendant or an insurance carrier will fund the settlement by transferring funds to a third-party assignment company. The assignment company then sends the funds to the structured settlement carrier to pay the claimant per the agreed-upon arrangement. This process allows the claimant to maintain the tax-free benefits of the structured settlement annuity.
Call Sage Settlement Consulting Today
Structured settlements can provide injured claimants with a secure financial future and many other benefits. With the right plan, you can set up your agreement for your unique circumstances. With so many options available, it is crucial to have a professional guide you through the process.
Please reach out to our team to discuss your situation and identify solutions for you. We help injured claimants nationwide. Call (855) 288-7243 or submit an online contact form today.
1 Guarantees are subject to the claims-paying abilities of the issuing insurance company.