Structured Settlement or Lump Sum – Which One is Better?

Structured Settlement or Lump Sum - Which One is Better?

Have you ever experienced an accident that caused you injuries?  Well, as the victim, you don’t have to pay your own bills. The perpetrator should be the one who will pay for it. That’s why there are terms that we call compensations. Yet, there are two types of compensation, and it is hard to choose. That’s why you should know your situation if you will go for structured settlement vs lump sum. 

Personal injury is either an accident that’s unintentional or an injury of negligence. The one injured in an accident should always receive compensation. This is to make up for the affected party’s losses and enable proper recovery. 

The law enables you to file a case and have some compensation after an accident. Also, recovery will only take place when you receive proper compensation.  Yet, before requesting for a settlement, there are legal things you should consider:

  • A specific proposal made by one party to another,
  • Unconditional acceptance by the receiving party of that offer,
  • Consideration.

There are two options when you choose a settlement: structured settlement vs lump sum. A lump sum is a settlement through a single, sizable payment. This is a method in which you will receive one big payment under the arrangement you two have reached.

If you don’t want a one big payment you can choose the structured settlement. You will receive a steady stream of tax-free payments that can cover your bills and needs.

You should now know a little bit of information about your two options. Thus, the question is “Will you choose lump sum or structured settlement?” That’s why let me give you four (4) factors in whether you will choose lump sum or structured settlement.

  • Implications
  • Investment
  • Tax
  • Pre Settlement Loan
  • Pros and Cons of Lump Sum and Structured Settlement
  • Conclusion
  • Implications

The aim of both the forms of settlement is to pay for any damages or injuries caused by the party at fault. 

Structured settlement, a support network to give people comfort and long-term income stability.  Structured settlement allows you to set your own payment method. This would let you have a peace of mind and be worry-free. You can also use this as a mental compensation if you have received psychological trauma. Since it is long term you can use it to pay your check ups.

In choosing lump sum, it means you are choosing to pay everything right off the bat. This can allow you to pay all your expenses, even liabilities straight away.  You can also use this to pay other bills such as loans and mortgage. This will also enable you to prepare yourself if there are bills that are over the medical bills.

  • Investment

In investments, lump sum compensation is your go-to compensation. The excess money you will get can be your tool to have a long-run investment.  You can start a business, enter stock markets or any way that you can build a secondary source of income. 

You can use it as a capital for a business and also prevent you from bad investments. If on your first try, the business did not work the way you wanted it to. You will still have funds for another period, so make sure you will not do the same thing again. 

But, a reminder if you want to invest your money, you should first pay all injury expenses and liabilities.

  • Tax

Sometimes you’re thinking, “Do compensations include taxes?” or “Will I receive it?” Don’t worry, cause—personal injury damages are one of the few lawsuit types that aren’t subject to taxes.This includes different factors including mental instability due to physical injury. 

  • Pre Settlement Loan

So far, we have tackled the different things you need to know or to consider when you are choosing which compensation you need in different situations. Now, let us see what a pre-settlement loan is.

A pre-settlement loan is an advance on an anticipated settlement or decree in an awaiting legal case. Following the filing of a lawsuit, a lawsuit funding corporation lends you money based on the estimated value of your legal claims. Repayment is required for a loan to be considered.

It takes roughly 18 months for a personal injury lawsuit to be compensated (whether lump sum or structured settlement), thus many people who have been involved in an accident need immediate funds for their expenses and their medical bills. 

But pre-settlement loans have their own advantages and disadvantages. Here are some of them.

AdvantagesDisadvantages
Reimbursement will not be charged unless the client would have a successful financial recovery.Approval amounts range from $500 to $50,000, but not exceeding this range.
You don’t have the responsibility to pay it off.An attorney who specializes in personal injury must represent you.
The majority of personal injury cases are eligible for a pre-settlement loan.Fees are comparable to credit card interest rates, and a home loan may be a better option.

Always remember that pre-settlement funding is a non-recourse cash advance on your case’s future settlement or court award; you never have to pay out of your pocket—no going into added debt. 

  • Pros and Cons of Lump Sum and Structured Settlement

Structured Settlement

PROSCONS
Entitled to receive funds to cover expenditures over an extended period of time.Most of the settlement is inaccessible to you.
Continuous payment for long-term needs
Secured from the outcome of poor investment decisions.You might find yourself unable to pay unexpected bills.
You are under less obligation to give the money away.

Lump Sum Settlement

PROSCONS
Having a lot of cash on hand.Hard to budget if not responsible enough.
Can invest immediatelyCan result to bad investment
Pay all expenses
  • Conclusion

These types of settlements depend on your situation and your daily expenses. Make sure that either the lump sum or structured settlement will be able to address your problem. But still, these two types cannot be given immediately because it takes a long time for them to be settled.

Thus, you should find a proper legal funding company that has an optimized and excellent service of legal funding which is known by many as a pre-settlement loan. Make sure that it is risk-free and will be able to cover all your needs.