What Is A Structured Settlement?
What is a structured settlement and how can it benefit you financially? A structured settlement is most easily explained as a specific number of payments of a specific dollar amount over a specific period of time. The payments are usually received by an injured party, and the payments are made by the defendant, or liable party. For example, a person disabled in a car accident may receive a structured settlement from the insurance company of the person responsible for the accident and injury.
A structured settlement is normally used as the payment vehicle for an injury lasting a lengthy period of time, usually years, and not for an injury that will heal relatively quickly. For that type of injury, a lump sum payout is the most likely type of financial settlement. For more detail on the subject, I recommend the following article:
What is a Structured Settlement?
By Jennifer Bailey
Structured settlements refer to the structured payments in cash on an annual basis that is made to compensate the victims of personal injuries for what they have lost. These are alternative payment systems that provide cash settlement payments over time.
In 1982, the U.S. Congress gave structured settlements special legislative treatment to make large settlements more acceptable to parties and provide more security and protection to the victims. Because of this, many people now prefer a structured settlement agreement more than the usual lump sum distribution. Moreover, courts use civil actions to award them, including long-term living costs and the need for obtaining payments in cash.
Under a structured settlement, the compensations of an injury victim is continuously received over an extended period of time (often a lifetime), and is not a large one-time payment. This is one way of securing the victim and protecting him from any economic loss and difficulty he may have to deal with later. It also makes it easier for the defendant to give out cash payments.
Though beneficial, structured settlements are actually not appropriate in all cases. This will not do at all for situations where the accident victim is still capable, where treatment and care do not take a long period of time, and where the injuries are not really serious.
Instead, structured settlements are established for cases like the following:
- Severe injury that requires a long-term treatment and future medical costs will necessarily be incurred to meet living and family expenses
- Worker's compensation cases where the injured person may not be able to work anymore or at least work to the earning capacity that he would otherwise perform
- Disabilities, permanent or temporary, that will take lengthy recovery time
- Cases of death of family members whose dependents will need a regular income to substitute for what the lost parent or spouse had provided
- Cases regarding guardianship of minor children or another person who is known to be incompetent like having psychological, emotional, or mental disability
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The question of what is a structured settlement should now be fairly clear. There will be a responsible party and an injured party. The injury will be of a long-term, or even permanent nature and will require financial payments made over a period of many years, and the financial vehicle for these payments is the structured settlement. Of course, the specific details surrounding each settlement arrangement will be unique and different, but the overall structure and framework will be the same.