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Structured Settlement Basics

By definition, a structured settlement is a “financial or insurance arrangement whereby a claimant agrees to resolve a personal injury tort claim by receiving periodic payments on an agreed schedule rather than as a lump sum”. Structure settlements have been put in place to help victims who have been mistreated as the result of an unfortunate incident that results in injury or death that is caused as the result of the negligence of another individual. A structured settlement can be summarized in three simple categories, as there are three specific areas in which a structured settlement is typically awarded, which include:

  • Personal Injury
  • Wrongful Death
  • Workers Compensation

Legal settlements from personal injury cases, wrongful death cases and workers’ compensation claims are among the most common reasons people receive structured settlements. Once awarded a structured settlement, there are additional options that one has to consider when accepting the final agreement.

Payment Structure

With structured settlements, it helps keep the individual who is receiving the cash on a responsible budget. Instead of receiving an upfront sum of cash, through a structured settlement one will receive payments over a term of years or a lifetime. However one chooses to receive the payments from a structured settlement, the payments are sure to be tax-free. Structured settlement payments also last through one’s lifetime, which can provide one with increased financial security and ease. Also, should you die before the settlement runs out, your beneficiary will continue to receive the payments. In contrast, if a claimant accepts an all-cash settlement, there is no assurance that funds will remain after death for a named beneficiary.

Settlement Brokers

Structured settlement brokers are a special type of insurance agent who helps decide on a settlement as a case approaches. Brokers can run many financial projections based on a term of years, payments over your life, over your joint life with your spouse, etc.  You can even call for no payments for a period of time, with payments starting thereafter as a way to fund your retirement. Thus, structured settlements are very flexible.  Provided that you consider these issues before signing a settlement agreement, you can structure as much or as little as you want and take the rest in cash.

A qualified, structured settlement broker can help anyone during the structured settlement process. For individuals who have won large judgments as a result of negligence or malpractice, it can sometimes be difficult to know just how to handle all that money, which is why selecting a structured settlement broker is needed. While these types of brokers are not a dime a dozen, selecting the right broker takes some research. Brokers who have been in the business for a long time have track records, not to mention reputations. So it is important that one asks for credentials or references and some past cases to review. Additionally, a good structured settlement buyer will be listed in good standing with the Better Business Bureau (BBB) so that is always a great resource as well.

In Conclusion

Structured settlement annuities are offered exclusively through structured settlements specialty brokers who have the ability to structure exactly the right settlement for the situation. Hopefully one will never have to deal with a situation where one is injured but as life is unpredictable should an unfortunate situation arise, a structured settlement is definitely the best way to settle.