What is a Structured Settlement? Everything You Need to Know

If you watch television, the chance that you’ve heard the term “structured settlement” mention in a commercial is high. But what is a structured settlement? How does it work and does it apply to you?

If you’ve ever wondered what a structured settlement is, or you’re here because you are facing the possibility of a structured settlement and want to know more, you’re in the right place. Read on to learn more about structured settlements and how you can handle the payout.

What Is a Structured Settlement?

If you have been injured in an accident or won a civil suit (such as a personal injury lawsuit) against a plaintiff, you may be awarded a large sum of money. Instead of getting this money in one large lump sum, you may instead be offered a structured settlement.

A structured settlement allows the insurance company or defendant to pay this award in smaller payments spread out over time rather than all at once. The benefit to the person or organization paying is that they can manage their cashflow. If they don’t have the money to pay, it also allows them to pay in installments and meet their legal obligations.

How to Manage a Structured Settlement

The terms of the settlement can vary, which is one of the benefits of opting for a structures settlement. You can choose to receive the money when you need it most

Some of the options include a large initial payment, payments that increase over time, delayed payments, payments that decrease over time, and extra payments at certain times when you need them.

Initial Payment

You can opt for a large initial payment and then divide the remaining amount up over a number of years. The benefit of this is that you can use the initial sum to pay bills, such as medical expenses, or make large necessary purchases, such as a home or vehicle. The later payments can be used as yearly income, especially if you cannot work.

Payments That Increase Over Time

If you choose this option, you will start with low payments that increase over time. This is a good option if you expect your expenses to grow in the future and you don’t want to worry about managing all of the money now.

Payments That Decrease Over Time

This is just the opposite. Here, you start with larger payments that decrease as time goes on. This is a smart choice if you have a lot of expenses now or if you expect your income to increase over time.

Additional Amounts for Certain Expenses

If you know you are going to have certain large expenses, you can plan for a larger payment when these expenses occur. For example, if you have a child going to college in 5 years, you can receive a larger payment in the years that they are in college to account for that.

Structured Settlements and You

Now that you can answer “what is a structured settlement” and understand a bit more about structured settlements, you can choose an option that works best for you. Whether you need the money now or later, choose something that has your financial best interests in mind.

If you found this information valuable, be sure to check out some of our other posts before you go.

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