Plaintiffs who have suffered a personal injury are often entitled to a settlement, which can be handled in a few different ways. With a lump sum payment, a plaintiff receives the entire settlement all at once upon the resolution of a case.

Lump sums can be advantageous if the settlement you are receiving is relatively small in size. These are some of the other advantages of lump sum payments.

Get Your Money Now

One of the biggest advantages of lump sum payments is that you can access the money you want or need immediately. This is important if you need your money right away and can’t afford to wait for payouts over time. It’s also advantageous if you are planning to make a major purchase, starting a new business, or have many large medical bills to pay from your injury.

Take Control of Your Investments

If you receive a lump sum rather than an annuity, you may also be able to use that lump sum payout to invest as you please. You may be happier with a lump sum because you can put your settlement money into an IRA, invest it in the market, or spend it however you like. However, this arrangement requires excellent money management skills in order to take future inflation into account and have enough funds to last for the rest of your life.

Leave Money to Your Heirs

If your money is tied up in investments and annuities, it could be more difficult to leave money behind for your heirs. This is a cause for concern for people who are elderly, sickly, or simply planning ahead for the long-term. If you receive your settlement as a lump sum, you can arrange for those funds to be placed into accounts for easy access by your heirs once you have passed away.

Understanding Lump Sum vs. Annuity Payments

Although receiving a large sum of money all at once is exciting and can be beneficial in certain circumstances, it is also important to understand the basics of annuity payments and what their benefits are as well.

Annuity payments are financial products that are sold by insurance companies that enable you to set aside money to be paid out in increments over time. These are some of the benefits of receiving annuity payments for your settlement.

  • Potential increases in funds each year
  • Low-risk investment
  • Not taxable as income
  • Reliable source of steady income over time
  • No limitation how much you can put into an annuity
  • Flexible options of fixed or variable annuities

Whether you receive a lump sum or annuity, consider your current and future financial situation very carefully before making any hasty decisions. Even if you receive a structured settlement in the beginning, you can choose to sell your structured settlement or a portion of it later on to receive a lump sum of the remaining balance when you need it most. To learn more, contact Novation’s team of experts at 855-610-1849 or complete our online form for a free quote.


*Novation is not a financial advisor and/or consultant and strongly recommends that you speak to a lawyer and/or accountant before making any significant financial decisions.