Structured settlement is a type of a financial option that involves periodic payments to a claimant. This is mostly used on lawsuits and insurance claims. It was predominantly created as an alternative to lump sum payments.
For example, you won a lawsuit against a company that you sued for a certain accident caused by their negligence. As such, the court ordered them to pay you $500,000. Instead of giving you this amount in full, a structural settlement is created instead.
The settlement could include any of the following: annual payment of a certain amount, indexed settlements occurring monthly, or deferred payments. Structured settlements involve the purchase of an annuity, or several of them for that matter, from an insurance company.
There are advantages to accepting structured settlements instead of going for the lump sum. Claimants are usually protected against inflation if they go for this option. This arrangement is also a way to keep the money flowing in, instead of losing it faster over a period of time. Another advantage is to lessen tax obligations that are usually associated with a big amount of money being invested in a bank or any other similar setup.
However, if there are advantages to structured settlements, there are disadvantages to it as well. For one, some people find the periodic payments rather limiting, as they won’t be able to buy expensive items like properties and cars if they choose structured settlements.
However, structured settlements only change the time and the manner by which you will get your money. But the award or the amount will receive is going to be the same. The deferred payments may work for some while others may not be too happy about it.
The good news is that the people who are receiving structured settlements now have an option of selling their annuities to individuals, groups, and parties that are interested with it. If you think that this setup is good enough for you, keep it. If not, you can always sell it out.
