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  • Writer's pictureRobert Schuerger II

Compensation: Should You Choose a Structured Settlement?

When victims who have been harmed by someone else's actions win or settle their personal injury cases, they can choose between two options to receive their winnings: a one-time lump sum or several smaller payments over a specific period.


The latter, which involves splitting the compensation sum into smaller parts and taking those payments over time, is also known as structured settlement. Is it the best option for plaintiffs in personal injury claims?


Whether victims should choose a lump sum payment or structured settlement will always depend on multiple factors, such as their needs, tax liability, ability to manage large sums of money, and how they plan to use this amount. Schuerger Shunnarah Trial Attorneys can answer more questions like how much can I get for my personal injury case?


Below is more information on how structured settlements work and what plaintiffs in personal injury cases should consider to decide whether they should opt for this option or a lump sum payment.


What Is a Structured Settlement?

What Is a Structured Settlement?


In essence, a structured settlement is an alternative to the traditional lump sum payout that many people take in a personal injury claim. Instead of receiving the entire amount at once, plaintiffs choose to take periodic payments over a specific time.


Although they're typically available in all lawsuits where defendants must pay damages to plaintiffs, these are the cases where structured settlement payments are common:

  • Personal injury

  • Workers' compensation

  • Discrimination

  • Medical malpractice

  • Wrongful death

Getting a Structured Settlement

These periodic payments often occur in legal cases where the plaintiff and the defendant reach a settlement agreement after negotiations. Both parties must agree and commit to the terms.


Additionally, the court must approve the settlement and sign the judgment for it to become effective.


Understanding How Structured Settlements Work


As mentioned, both parties must agree on this method and set the terms, defining how and when the settlement money should be paid. After that, the defendant must make payments accordingly.


In these cases, defendants can also purchase a structured settlement annuity from an insurance company. If they choose this option, the insurer will be responsible for making payments.


The Structured Settlement Process Explained

If plaintiffs opt for a structured settlement payout, the process is typically handled as follows:

  • The claimant and the defendant reach a personal injury settlement.

  • Both parties agree on a structured settlement for compensation.

  • The plaintiff agrees to drop any further legal action and releases the defendant from further liability.

  • The defendant makes the payments by funding the settlement.

  • A life insurance company makes payments if the defendant purchases a structured settlement annuity.

Can Plaintiffs Benefit from Structured Settlement Annuities?

Although this depends on the circumstances of each case, structured settlement annuities often benefit both parties. Plaintiffs don't have to rely on another person's financial liability. Furthermore, defendants don't have to bear these payments, so they can move on after taking that burden off their shoulders.


Payout Options: How Will Plaintiffs Receive The Money?


Different factors define how structured settlements are arranged, including the agreement between both parties, the extent of the damages suffered, and the plaintiffs' needs. However, these are the common options:

  • Large initial payment with subsequent smaller periodic payments

  • Increasing payments, which start out with smaller payments but increase the amount over time

  • Decreasing payments, which start out with a larger sum and reduce the amount over time

  • Delayed payments if plaintiffs want to defer the receipt of the compensation until later in life

  • Additional payouts for extraordinary expenses, which occur when plaintiffs receive a specific amount at a specific time but are allowed to take additional payments to cover unusual expenses

Who Are Structured Settlements For?


Each method has its own pros and cons. People who need to pay huge bills can choose to receive all the money at once through a lump sum settlement, while those who want to avoid the complications that come with a large amount of money and prefer guaranteed income over time may opt for structured payments. Schuerger Shunnarah Trial Attorneys have more information on the chances of winning a personal injury lawsuit.


Pros of Structured Settlements

These are some of the biggest advantages of structured settlements:

  • Plaintiffs get a continuous stream of income, and it's tax-free, guaranteeing long-term financial support.

  • Since this method is flexible, victims can arrange structured settlement payments based on their needs.

  • There's less temptation to spend or share all the money right away because plaintiffs don't receive the entire sum at once.

  • In some cases, structured settlements can last a lifetime or can be used to provide for loved ones since payouts can continue to dependents if plaintiffs pass away.

  • With structured settlements, managing money can be easier.

Cons of Structured Settlements

Structured settlements also come with some drawbacks, including the following:

  • Accident victims cannot change settlement terms after both parties agree to them, so they may have difficulty accessing more money if the current sum no longer meets their needs.

  • Plaintiffs cannot access the settlement money whenever they want or need it because this method isn't flexible.

  • Victims could lose some of the awarded money if insurers managing the settlements charge exorbitant fees.

Should People Choose Lump Sum Payments or Structured Settlements?


A person who has been injured by someone else's actions and wins or settles a case is free to choose the option that best suits their needs. However, this can have long-term consequences on their personal and financial lives. Therefore, it's important to evaluate each method to make the right decision.


These are a few aspects that plaintiffs can consider to know if a structured settlement or lump sum payment can benefit them:

  • Tax obligation: In personal injury cases, whether awards are tax-free or taxable depends on whether they compensate for injuries and damages or are intended to punish the defendant. The payment method can also affect this.

  • How the money will be used: Plaintiffs who need quick money to pay past due bills or repair damaged property can benefit from a lump sum payout, but structured settlements could replace future income. Their goals and needs play a key role in this process.

  • Money management skills: People who don't have experience managing large sums on their own should seek professional advice to make a choice based on their financial situation.

  • Risky investments: Many people are more vulnerable to spending settlement money on risky investments if they receive it at once, so they could benefit from periodic payments.

  • Intimidating pressure: After receiving a large lump sum, many people report that their family or friends ask for loans or pressure them to give them money.


Do Victims Need Help from a Personal Injury Lawyer?

Do Victims Need Help from a Personal Injury Lawyer?


Deciding whether a lump sum payment or a structured settlement is the best option can be challenging for most victims. However, an experienced personal injury attorney in Cincinnati can help them make the right choice.


At Schuerger Shunnarah Trial Attorneys, we have extensive experience handling personal injury cases and negotiating structured settlements on behalf of plaintiffs, so we can guide accident victims in Cincinnati, Ohio, through the legal process and provide advice to help them make an appropriate decision. Contact our law firm today!

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