Lump Sum vs Structured Settlement (Understanding Disbursement Options)

If you are a personal injury victim, one of the most important decisions you will make is what to do with your personal injury settlement. Settlements are damages recovered from a personal injury claim or lawsuit that were negotiated and settled upon outside of court. There are two types of settlements that a personal injury plaintiff can receive: 1) a Lump-Sum Settlement and 2) a Structured Settlement.


lump sum contract


Lump-Sum Settlements

In a lump-sum settlement, the plaintiff elects to receive the entire settlement amount in a one-time, lump-sum payment. There are a variety of reasons why a plaintiff might choose to receive their settlement in one lump sum, often because they simply prefer to manage and invest the money on their own. If you are good at managing money and have a solid investment plan, choosing a lump-sum payment will allow you to spend and invest the money as you see fit.

On the other hand, a person may have immediate financial concerns and need the money. You might have debts that need to be satisfied right away, such as:

  • Credit card bills
  • Medical expenses that weren’t covered by your insurance
  • Your children’s tuition


Or else, you might want the money to pay for something you or your family needs, like a home, a car, or customizations that need to be made to your home or car to accommodate your disability.

Structured Settlements

In a structured settlement, the plaintiff typically elects to receive a portion of his or her settlement in a lump-sum, in order to pay for things like medical bills, lost wages, and out-of-pocket expenses. The remainder is then received in a series of periodic payments (monthly, yearly, biannual etc.) for a fixed period of time, which can range from a few years to the rest of the plaintiff’s life.

Structured settlements are most often utilized in cases in which the claimant has suffered a lifelong disability and/or will need care or medical treatment for the rest of his or her life. Structured settlements are also common in cases that involve minors who receive large settlements. Conversely, they are quite uncommon in cases involving adults who are to receive relatively small settlements.

How Settlements Are Structured

A structured settlement is basically a guaranteed annuity or pension that is designed to help meet the plaintiff’s current and future financial needs. As the plaintiff, you choose the period of time over which you would like to receive payments, according to your particular needs.

For instance, let’s assume you have been injured in a catastrophic motor vehicle accident that left you partially disabled. Let’s also assume that you settled with the defendant’s insurance company for $1.2 million. But rather than receive your settlement in one lump sum payment, you can negotiate to receive the funds in a series of $5,000 payments to be paid to you monthly over a period of 20 years.

As mentioned above, you could also take part of the settlement upfront to pay for special needs such as a wheelchair or customizations to your home or automobile. Furthermore, your payments can be designed to increase at certain periods of time, such as when you need surgery or to pay for large medical expenses in the future. The possibilities are virtually limitless.

The Advantages of Structured Settlements

Structured settlements have become increasingly popular with plaintiffs because there are a number of key advantages that structured settlements offer over lump sum payments:


1. Money received through a structured settlement is tax-free

2. All of the terms are negotiable––payments can be customized to meet the injured parties financial needs over a specific period of time.

3. The money is protected––structured settlements are guaranteed and backed by highly rated financial institutions.

4. Structured settlements protect plaintiffs from bad investments, poor money management, and the influence of others.


As a personal injury victim, you may need some type of medical care for the rest of your life or be unable to work. So it is important that you take steps to properly manage and safeguard your settlement funds, which are intended to guarantee the medical and economic assistance that you will need to maintain life after your catastrophic injury.

Therefore, when deciding which settlement disbursement option is best for you and your loved ones, it is crucial that you consult with qualified and experienced legal professional who specializes in personal injury cases such as yours and who has the expertise to help you make the right decision for you and your family.

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