How Should I Take My Personal Injury Insurance Settlement?

A personal injury insurance settlement can be offered to be paid in a lump sum, an annuity or through payments made according to a scheduled interval. The type of settlement payout structure you should accept depends on your financial health at the moment and your expectations of monetary need in the future.

Lump Sum

A lump sum payment is usually offered when the total amount of the payout is small, typically anything under $100,000. In this type of payment, the insurance company writes one large check to the injured party and the injured party can walk away, cash the check and do anything he or she wants with the money. There is no subsequent recourse available to an injured party if he or she spends all the money but still requires more medical care.

Annuity

An annuity is a monthly payment that comes due when the recipient turns a certain age, typically 65. In this setup, either the insurance company invests an amount of money that is expected to grow to the total amount due when payments begin or the insurance company deposits the total amount of the settlement into an annuity account and it grows in interest over time until payments begin.

Structured Settlement

A structured settlement is when the injured party receives payment monthly, quarterly or yearly for a certain length of time. This method permits the insurance company to pay the compensation award over time.

Short Term Considerations

When choosing the type of settlement payout you would like to receive, consider your current financial state. If medical bills and other fees have left you in the red, consider taking the payment in a lump sum so that you can get out of debt quickly. If this is not the case because your insurance company has covered the costs of your injury, you might want to leave it in the stock market for awhile to gain interest.

Long Term Considerations

Also important when deciding how to take your settlement payout is your long term financial goals. If you want to plan for retirement or if you anticipate needing to care for your injury indefinitely or for a length of time, you will need to plan financially for those circumstances. In this case, receiving payment in the future or periodically may be the best choice.

Getting Legal Advice

If you are faced with a decision about which type of settlement payment you should accept, consult with an attorney about the benefits and drawbacks of each choice. An attorney will be able to point out previously unnoticed concerns or even tax repercussions that may result from the options.  

Have a Personal Injury Case?

Get Your Case Reviewed. Talk to a Personal Injury Lawyer Now

Want to Learn More?

Check out Nolo's Do-It-Yourself Resources

How to Win Your Personal Injury Claim

Win Your Lawsuit

Represent Yourself in Court

eBook - $32.99 | Book & eBook - $34.99

eBook - $37.99 | Book & eBook - $39.99

eBook - $37.99 | Book & eBook - $39.99