If you or someone you love has suffered injuries in a car accident and pursued a personal injury case against the responsible party, you may be anticipating a significant amount of compensation for your medical bills, lost wages, pain and suffering, and more. There are a few different ways that victims can be awarded this compensation, including a structured settlement.
What Is a Structured Settlement?
A structured settlement is an agreement in which the money awarded to an accident victim is paid out over time. Rather than receive a large lump sum right away, the victim is given the compensation in equal amounts over months or years. Typically, the monetary award is put in an annuity from a life insurance company. An annuity is a form of insurance that is paid out in regular disbursements. Annuities are also commonly used for retirees, to ensure they receive a steady stream of income over the years of their retirement.
Pros of a Structured Settlement Annuity
The compensation from a civil case like a car accident claim is usually offered in a lump sum. There are, however, a number of benefits to accepting a structured settlement. Some of the pros of this agreement include:
- The payments are tax free.
- The recipient can designate an heir who can continue to receive the payments in the event of the primary recipient’s untimely death.
- The payment schedule is flexible and can be designed to meet each individual’s unique needs.
- Receiving payments over time can ensure a steady flow of income and reduce the temptation to spend the large lump sum quickly.
- The payments can often yield a larger amount of money than lump sum payments due to interest the annuity can earn over time.
A Structured Settlement May Not Be Beneficial to All Accident Victims
There are a number of drawbacks associated with a structured settlement, however. The cons include:
- Once the terms of the structured settlement are finalized, they cannot be renegotiated at a later time.
- The full amount of compensation is not readily available if the victim needs to access it for any reason.
- Some parts of the settlement can still be taxed, including attorney’s fees and punitive damages awards.
- The annuity is dependent on the honesty and reliability of the insurance company that holds it.
Accident victims should carefully weigh their options and discuss their situation with their attorney and financial advisor. If you or someone you love has suffered injuries in a car accident, you may be eligible to pursue a personal injury claim. Contact the experienced accident attorneys at Kennedy Hodges, LLP to schedule a free consultation and learn more about your rights.