When you are hurt by the carelessness of others, the last thing on your mind might be the way you are paid your settlement. Sooner or later, however, the negative financial ramifications of your car accident will become more apparent and you may seek compensation. You have a choice about how you are paid when you agree to a personal injury settlement, so read on to learn more.
Lump Sum or Structured?
The negotiation for payment of the money damages you are owed will include more than just the dollar amount—it may also include the way it's paid to you. Most people opt for the lump sum payment when offered a personal injury settlement, which provides the entire settlement to you right away. You might need a cash infusion to help you get your finances in order before you begin taking regular disbursements. In other cases, a structured settlement that pays you incrementally makes more sense. It should be mentioned that hybrid structured payments are an alternative to the other two. Read below to find out both the advantages and the disadvantages of a structured settlement.
Advantages of a Structured Settlement
1. It might be easier to get the total amount of compensation you want if you agree to a structured settlement. It puts less financial pressure on the insurance company and they may be more agreeable to your demands.
2. You might save money on taxes. In most cases, there are certain parts of a settlement that are taxable. Breaking up the payments may mean less of a tax burden each year.
3. It provides security for your future. You might be tempted to spend a lump sum settlement, leaving you without financial means as you get older. Structured settlements allow you to have a steady, reliable income stream.
Potential Disadvantages of a Structured Settlement
1. Structured settlement payments may be perceived as income by you, but not by lenders. In some cases, auto loan and mortgage lenders won't allow you to use a structured settlement to qualify for a loan. If you plan to purchase a home or vehicle, you might be better off taking the lump sum settlement.
2. Inflation is unpredictable. What might have seemed like an excellent monthly payment at the time you signed the settlement papers could begin to feel like less and less as the cost of living rises steadily. Be sure to keep that in mind when your attorney negotiates your award.
To find out more about structured versus lump settlements, speak to your car accident attorney.Share