In a lump sum settlement, the claimant receives all of the money at one time. In a structured settlement, the claimant or plaintiff gets regular payments for a designated period of time. The defendant’s insurance company works with an indemnity firm to arrange for delivery of the promised payments.
Benefits linked to a structured settlement
The recipient feels ensured of the fact that money will be get delivered to him or her on a regular basis, over a prolonged period. Most states have provisions that ensure the continuation of such deliveries, even if the insurance company were to experience financial difficulties.
This can allow for compensation of a large number of different expenses. A small portion of each payment gets used to compensate the recipient for a specific damage. This can be tailored, so that it meets the needs created by a claimant or plaintiff’s future problems. By seeking the help of an economic expert, the claimant or plaintiff’s personal injury lawyer should gain good insight into the future financial needs of his or her client.
This arrangement works well, if the claimant/plaintiff happens to be disabled, or is recovering slowly from the accident-linked injury. No one can try to obtain a part of a lump sum payment, and, thus, deprive the recipient of some useful funds.
Drawbacks associated with structured settlement
Such settlements often come with consequences, specifically with respect to taxes. Not every aspect of each payment covers a personal expense. Claimants/plaintiffs that have received punitive damages should expect to have that money taxed. The delivery of money for punitive damages from the insurance company does not match with a designated expense.
Claimants/plaintiffs that have received the accrued interest on a given payment should expect to have those funds taxed, as well. If a defendant’s insurance company has delayed with sending a payment, the undelivered money collects interest. The government has the right to tax that accrued interest.
Accident victims that get their compensation over an extended period of time get deprived of the chance to pursue a long-term investment. The recipient of a lump sum enjoys the option of placing at least some of the money in some type of investment.
Over time, changes in the cost of living could make the scheduled payments too small. Personal injury lawyers in Guelph look to economic experts for help, when trying to predict prices in the future.
When arranged properly, structured settlements are meant to keep providing the recipient with an acceptable level of funds. By the same token, the testimony from a medical expert should alert the economic expert to the sorts of future problems that could create a demand for coverage of a specific treatment, medication or other remedy.