If you are injured by someone else’s negligence, and if you can prove it, you are entitled in every state to full compensation for your medical costs, lost wages, pain, suffering, and other damages. While your claim is pending, you may choose to work with a settlement funding company.

Many personal injury payments are made in a lump sum, but some personal injury victims prefer to receive their compensation over time and in installments. If you acquire compensation after a personal injury, is it better to be paid in a lump sum or over time with a structured settlement?

How Does a Structured Settlement Work?

A structured settlement is a payment stream that may be awarded as your compensation when your personal injury lawsuit prevails. For many injury victims, structured settlements are a practical alternative to the lump sum payments that offer no long-term stability or security.

With structured settlements, injured parties whose claims prevail receive a regular, steady stream of payments over an extended time period. In medical malpractice cases, for example, structured settlements are often arranged for injury victims who require long-term or lifetime medical care.

Like almost everything in personal injury cases, the terms and conditions of a structured settlement may be negotiated, such as:

  • how frequently and for how long the payments are to be made
  • the dollar amount of each payment
  • whether the payments stop or continue and go to your heirs after your death

What Is the Advantage of a Lump Sum Payment?

If you accept your personal injury payment in a single lump sum, when you receive the compensation check, all of the legal and financial aspects of your case are complete. However, in some circumstances, you may find that a structured payment over time is preferable.

The primary advantage of lump sum payments is this: You receive all of your compensation and the matter is finished. A personal injury plaintiff may have bills to pay and creditors to satisfy when his or her case concludes, and those payments can be made immediately from a lump sum.

What Is the Advantage of a Structured Settlement?

For larger amounts, structured settlement plans offer some practical advantages. Some personal injury victims do not manage their wealth properly and quickly end up broke or even in debt, but a structured payment plan ensures that you can’t lose your entire compensation all at once.

A structured payment plan can also reduce your tax burden over time. While the principal compensation payment may not be taxable, taxes will eventually have to be paid on any dividends and interest that you earn from investing that principal.

Because a structured settlement does not let all of your compensation sit in your bank at once, you will pay less each year in taxes on your interest and dividends. And if you need quick cash in the future, you can sell your structured settlement payments to a structured settlement buyer.

If You Need Pre-Settlement Funding

If you need pre-settlement funding now – while your personal injury lawsuit is still pending, and your debts are mounting – you may choose to work with a settlement funding company.

To learn more about pre-settlement funding, speak to the funding and finance professionals at Universal Funds. It would be our privilege to assist you with pre-settlement funding details and services.