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Which Type of Settlement is Best for Your Financial Situation?


When you’re awarded in a civil lawsuit, you’re usually compensated through a settlement. But did you know you have a choice of the type of settlement you’ll receive? Actually, there are multiple options, and the one that you select should best suit your financial situation.

With that in mind, if you are unsure of the type of settlement to choose, keep reading to learn more about your options.

Lump Sum Settlement

When you’re awarded compensation due to a civil lawsuit, one of the primary settlement options is to get a lump sum. A lump sum is the easiest way to receive funds for damages. It’s just one single payment provided to you at once.

For instance, if you win $75,000 for your case, that’s how much you’ll receive and the case is closed.¬†However, there are¬†situations that warrant a deferred lump sum. This is normally something that might happen if a child is involved in a particular case, but it can also pertain to adults.

In this situation, a deferred lump sum is released at a future date for college education, their 18th birthday, or even retirement. Lump sum settlements have many perks because you get all of the money at once, and you can spend it as you see fit.

On the downside, if for some reason you lose the money or something goes wrong, that’s it. There won’t be anything else that comes in or a way to recoup the funds.

Structured Settlement

Structured settlements work quite differently. They consist of a payout that occurs over an extended amount of time. Structured settlements are set up on a schedule for claimants to receive tax-free payments. In most cases, the money is sent out once a month over a span of 15 to 20 years.

Structured payments are generally paid through annuities that are bought by the defendant from a life insurance company.

The good thing about structured settlement payments is that they provide stability and you can expect monetary support long-term. Also, you don’t have the financial burden of potentially squandering your money or having the pressure of lending it to others.

Unfortunately, periodic payments also mean that you won’t have access to the majority of the settlement amount, and if a financial situation arises, you won’t have the funds to cover it at once.

If you are currently receiving structured payments, take a look at this article about how to “sell my structured settlement“.

Understanding the Type of Settlement to Choose

The good thing about lawsuit payouts is that you get to choose the type of settlement you want to receive. If you’re struggling to decide between a lump sum vs periodic payments, hopefully this information helps. So, do you know which structured settlement option you’ll choose?

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