What are the pros and cons of structured settlements?

Structured settlements can provide you with payments for many years to come after you’ve suffered an injury. There can be some positives and negatives to this settlement process, though. These are some of the most common.

What are some positives of structured settlements?

Some pros of a structured settlement include the fact that you can receive a substantial tax benefit, you can receive your payments over time and you may receive both a lump sum and a structured payment schedule to help you balance the incoming funds. With structured settlements, any kind of personal injury payments are not able to be taxed, so that can help you bring in a higher income with less tax going out. On top of that, if you receive your payments over time, they can be adjusted for contingencies in your care. Of course, receiving a lump sum initially can be beneficial in helping you afford some important medical care or to make up losses in your wages, while ongoing payments can be used like a paycheck.

In most states, if you’re receiving payments from an insurer, that insurer’s obligations are covered regardless of what happens to the company. So, if an insurance company happens to go bankrupt, for instance, you can still get the payments you need over time.

What are some negatives of structured settlements?

Some cons include the fact that some parts of your settlement, like punitive damages, can be taxed. Unknown changes in the economy can also affect the value of the money being paid due to inflation or a recession.

Source: FindLaw, “Structured Settlements: Pros and Cons,” accessed March 11, 2016