If you have filed a personal injury case, you often expect compensation for your injuries, pain, loss of income, and any other adversities the injuries caused. The compensation can be a single payment or a structured settlement.
However, since settlement amounts are huge in many cases, insurance companies often prefer awarding structured settlements. If you choose a structured settlement, the insurance company will pay your settlement over time instead of providing you with a lump sum.
While a structural settlement will not make you rich, you get a source of income for an extended period.
Below are some benefits of structured settlements.
You Get a Secure and Predictable Income
Since the insurance company that issued the annuity guarantees the structured settlement, your payments will not fluctuate with market changes like mutual funds, bonds, or stocks. Also, if the insurance company goes into bankruptcy, state regulators will transfer all policies to a stable insurance fund or keep them active through the state guaranty fund.
You Can Match Your Payments With Your Future Needs
If you receive your compensation in structured settlements, you know the amount of money you will have years or decades in the future. You can also receive lump sums on particular dates when you need them.
For example, if you need to pay for surgery in the future, you can arrange with the insurance company to provide the amount you need on that date.
You Will Avoid Exhausting the Settlement Money
When Congress passed the Periodic Payment Settlement Tax Act in 1982, the idea was to decrease the number of personal injury settlement recipients who relied on public assistance after depleting their funds too quickly.
Unlike when you receive your settlement amount as a lump sum, structured settlements come in periodic payments that are just enough for your needs, making it impossible to squander the money.
For example, if you require medical care for life, the insurance company can directly pay your medical services provider. This way, you will avoid making wrong financial decisions, like overspending or losing your money to bad investments.
You Will Be Safe From Creditors
Many states in the US have statutes that protect annuities from legal processes. The argument is that the insurance company owns the annuity and the injury victim is the payee. Therefore, since you do not own the structural settlements, you will be safe from creditor claims and bankruptcy.
Also, structured settlements offer protection against divorce because they cannot be divided like assets.
You Will Make Substantial Tax Savings
Even if lump sum settlements are not taxable, your gains from investing this money become taxable. However, if you receive periodic payments through structured settlements, you will receive your money over an extended period without taxation, even for the interest earned.
The only potential exception to the non-taxable nature of a structured settlement is any money to compensate for emotional damage.
You Can Benefit From Medical Underwriting
If you receive a rated age rating after reviewing your medical history, the insurance company will use the rated age to price your lifetime annuity. Therefore, if your rated age shows a lower life expectancy, your settlement for your lifetime will be higher.
Your Settlement Money May Earn Some Interest
Your structured settlement can earn interest over time, leading to higher payments than you would have received as a lump sum payment.
At Williams & Swee, Ltd., we are dedicated to providing prompt and effective legal services to our clients. Contact us today for a free consultation. We are happy to go over all the questions and concerns you have so that you feel confident in the legal choices you make.
