In the American court system, most personal injury cases settle out of court before going to trial. Many of these settlements are paid all at once; however, another option is to receive payments spread out over a period of years. With this option, part of the settlement is typically paid out immediately and the remainder is transferred to an insurance company to handle the subsequent payments.

It’s important to know your options when you settle a case, so to guide you, these are the basics to know about personal injury structured settlements.

Structured Settlement vs. Lump Sum Settlement

If you choose to receive a lump sum payment for your personal injury case settlement, this means that the defendant or the defendant’s insurance company issues just a single payment to you. This is an attractive option if you need the money right away to pay off medical or legal bills. Unrelated to your case, a lump sum could help you buy a new house or car, invest in a new business, or pay college tuition costs.

However, structured settlements are often recommended when settling larger cases for sizeable sums of money. This arrangement ensures that you don’t spend your money too quickly and it can help save you money on taxes, as you may have to pay taxes on interest and dividends you receive on the money after investing it.

What is a Structured Annuity Settlement?

A structured annuity settlement provides regular payments over a period of time that are tax-free and designed to meet the needs of personal injury plaintiffs. It is possible to increase your settlement funds by investing in interest-earning annuities that are purchased by insurance companies.

It’s important to consult with a specialized structured settlement consultant to work out the details of your payments and design a structure that works for your best interests. You can negotiate your structured settlement terms to receive payments over a set period of time, for the remainder of your lifetime, and in either consistent or increasing amounts of payment.

Deciding to Sell a Structured Settlement

However, circumstances often change and you might need your settlement funds now instead of waiting for payments to come in over time. Selling your structured payments  is an option to consider if you have lost your job, your mortgage payments have increased, or you are suddenly faced with unexpected bills.

Once you decide to sell a structured settlement, you should get a quote before accepting your contract offer. Keep in mind that a judge will need to sign off on your sale in court, and the entire process typically takes a month or two to complete.


*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.