{"id":352985,"date":"2016-04-04T10:46:31","date_gmt":"2016-04-04T15:46:31","guid":{"rendered":"https:\/\/ability-fl-prod.internetbrands.com\/ability-law\/injury\/accident-injury-law\/structured-settlements-pro-s-and-cons.html"},"modified":"2025-10-28T13:56:13","modified_gmt":"2025-10-28T18:56:13","slug":"structured-settlements-pro-s-and-cons","status":"publish","type":"page","link":"https:\/\/www.findlaw.com\/injury\/accident-injury-law\/structured-settlements-pro-s-and-cons.html","title":{"rendered":"Personal Injury Structured Settlements: Pros and Cons"},"content":{"rendered":"\n
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Personal Injury Structured Settlements: Pros and Cons<\/h1>\n\n
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\n By Ty McDuffey, J.D.<\/a> | Legally reviewed by Katrina Wilson, Esq.<\/a>\n | Last updated\n
\n \n <\/i>\n Legally Reviewed\n <\/summary>\n\n
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This article has been written and reviewed for legal accuracy, clarity, and style by FindLaw\u2019s team of legal writers and attorneys<\/a> and in accordance with our editorial standards<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n\n

\n \n <\/i>\n Fact-Checked\n <\/summary>\n\n
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The last updated date refers to the last time this article was reviewed by FindLaw or one of our contributing authors<\/a>. We make every effort to keep our articles updated. For information regarding a specific legal issue affecting you, please contact an attorney in your area<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n<\/section>\n\n\n

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Key Takeaways<\/h2>\n

If you settle a personal injury claim, you’ll also negotiate the terms of payment. A structured settlement is an arrangement in which the responsible party pays portions of the compensation to the injured person over time. It differs from a lump sum, in which the other party pays the entire amount of compensation at once.<\/p>\n\n <\/div>\n <\/div>\n<\/div>\n\n\n

Not every personal injury lawsuit<\/span> will make it to trial. Many personal injury cases<\/span> reach a settlement agreement<\/span> earlier in the litigation process.\u00a0<\/p>\n

A settlement agreement<\/span> contains more than a figure for the total amount of compensation. It also specifies how and when the other party will provide the compensation.<\/p>\n

Before accepting any settlement agreement<\/span>, discuss all options with a\u00a0personal injury attorney<\/span><\/a>. They can help you explore how structured settlements<\/span> work<\/span>. This article will cover the basics, including some pros and cons of <\/span>structured settlements<\/span> for you to consider.<\/p>\n

Settlement Options in a Personal Injury Case<\/span><\/h2>\n

A\u00a0negotiated settlement<\/a>\u00a0requires the plaintiff to drop any further legal action. This is in exchange for receiving a payment from the defendant or the defendant’s insurance company<\/span>. Settlement payments<\/span> are usually made as a lump sum (all at once) or on a structured schedule.<\/p>\n

What Is a Lump-Sum Settlement<\/span>?<\/h3>\n

In a lump-sum settlement<\/span>, the person responsible for your injury (or more likely their insurer) pays a large amount of money<\/span> at one time. Lump-sum payments<\/span> may be better for cases involving minors.<\/p>\n

What Is a Structured Settlement<\/span>?<\/h3>\n

A structured settlement<\/span> offers<\/span> the injury victim<\/span> regular payments over several years. Or, if applicable, for the rest of the plaintiff’s life. A structured settlement<\/span> payout<\/span> may help parties reach an agreement if they are far apart in their settlement negotiations<\/span>.<\/p>\n

Structured settlements<\/span> can provide long-term regular payments in personal injury, workers’ compensation<\/a>, and medical malpractice<\/span><\/a> cases. They are especially helpful when the plaintiff suffers a catastrophic physical injury. They may be better suited for those who will need long-term medical expenses<\/span>.<\/p>\n

Blending Lump-Sum and Structured Settlements<\/span><\/h3>\n

You may combine a lump-sum payment<\/span> with a structured <\/span>settlement<\/span> payment<\/span> to meet immediate expenses. These can include medical bills<\/span>, debt repayment, and rehabilitation costs.<\/p>\n

For example, you may have a $70,000 product liability settlement<\/a> to be paid over a five-year period. The terms of the settlement say that you will receive a one-time lump-sum payment<\/span> of $20,000 to cover your immediate costs. Afterward, you can receive the remaining $50,000 through structured payments<\/span> in monthly installments (about $833 per month for five years). Note that this example doesn\u2019t include taxes, fees, and other factors.<\/p>\n

What Is an Annuity<\/span> for a Structured Settlement<\/span>?<\/h2>\n

An\u00a0annuity<\/span>\u00a0is a type of insurance contract that provides for scheduled payments<\/span>. They are often sold as insurance investment products<\/a>. In the context of a personal injury settlement<\/span>, a defendant’s insurer funds an annuity<\/span> policy for the plaintiff. Annuity<\/span> contracts cover a variety of expected expenses.<\/p>\n

An annuity<\/span> produces a continuous income stream over the structured settlement<\/span> term. Fixed-term annuities<\/span> last for a set period before the payments end.<\/p>\n

With a lifetime annuity<\/span>, there’s no risk of outliving the money. Future payments can last for the claimant<\/span>‘s lifetime. This structure can be particularly helpful in cases of permanent disability<\/span><\/a>, though a lump-sum disability buyout<\/a> may be suitable in some cases.<\/p>\n

In the past, some life insurance companies<\/span> didn\u2019t want to disclose how much they would have to pay to buy an annuity<\/span> covering the settlement amount<\/span>. A structured settlement<\/span> usually costs\u00a0insurance companies<\/span><\/a>\u00a0less than a lump-sum settlement<\/span>. This info is necessary for the plaintiff’s attorney to make a complete assessment of a settlement offer. Some states, such as New York<\/span> and Florida, have a disclosure law known as the “Structured Settlement<\/span> Protection Act<\/a>” (SSPA). These laws force insurers to reveal their costs in such cases.<\/p>\n

Could I Lose My Settlement if the Insurer Becomes Insolvent?<\/h2>\n

When considering a long-term structured settlement<\/span>, you might wonder what happens if the insurance company<\/span> fails. Most states have a safety net for insurance companies<\/span> that become insolvent. This guarantees coverage for an insurer’s obligations. Furthermore, federal law doesn’t allow an insurer to\u00a0declare bankruptcy<\/a>.<\/p>\n

In most states, insurance laws protect annuities<\/span>. Insurance companies<\/span> and policy claims will continue to be covered and paid by the home state’s guaranty association. This protection is subject to state limits.\u00a0Learn more about the key provisions in your state<\/a>\u00a0if you are unsure about the specifics.<\/p>\n

Despite this safety net, there’s always a risk that the insurance company<\/span> responsible for the annuity<\/span> could become insolvent. This could impact the payment of future benefits. Your lawyer can advise you on the potential risks associated with a structured settlement<\/span> for your claim.<\/p>\n

Pros of a Structured Settlement<\/span><\/h2>\n

Here are a few benefits of a structured settlement<\/span>:<\/p>\n