Structured settlements are not as complicated as they might seem. Here’s what you should know.
You Get Hurt.
The first thing you should know is that structured settlements are financial or insurance arrangements in which claimants agree to resolve a personal injury case by receiving periodic payments on an agreed-upon schedule, rather than taking settlement money as a lump sum. A number of different incidents can cause personal injury. Car accidents commonly result in structured settlements. In 2013, there were 21,132 passenger vehicle occupants who lost their lives in auto accidents, and about 2.05 million passenger vehicle occupants who were injured. Slipping and falling is another common personal injury. In fact, falls account for more than 8 million hospital emergency room visits, while slips and falls account for over 1 million visits. Even an inflatable amusement ride can cause personal injury. Believe it or not, there were about 113,272 emergency department-treated injuries associated with inflatable amusements between 2003 and 2013.
After you’ve been hurt, you sue the insurance company of the person or business responsible for the personal injury. Before the case goes to trial, the insurance company will try to settle things out of court. Your lawyer will help you get a settlement, which will then be paid out as either a lump sum or as a structured settlement. Many often choose a structured settlement arrangement. In fact, over 37,000 Americans use structured settlement money every year, and more than $6 million is paid each year to fund new structured settlements, with the average structured settlement payout being $324,000.
You Support Yourself.
Using the money from your structured settlement, you can support yourself. The payments can help take care of your medical expenses, mortgage payments, grocery bills, or whatever other costs need to be taken care of. Generally, structured settlement can begin paying out in as little as 30 days. However, if the structured settlement payments aren’t enough, you can sell it for a lump sum, which is often a smart decision. Research shows that 92% of claimants who sold their structured settlements were satisfied with the decision. That being said, be aware that selling off a structured settlement can cost surrender charges of up to 10%. Most personal injury cases are settled with lump sums, but if the amount is large, a structured settlement would be a wiser arrangement. Lump sum settlements work well for most small- and medium-sized settlements (less than $150,000 or so). Anything more than that, and you should get a structured settlement to help reduce the amount taken away by taxes.