What Is A Structured Settlement?

A lot of people don't really know What Is A Structured Settlement and hence they miss out on consolation it can provide them. As defined in wikipedia.org, a "structured settlement is a financial or insurance arrangement, including periodic payments, that a claimant accepts to resolve a personal injury tort claim or to compromise a statutory periodic payment obligation." Each country has its own rules and laws governing structured settlement so definitions may vary accordingly.

It's interesting to point out that you can even sell your structure settlement in case of a financial difficulties. Of course, this is only valid in case you are the person who was injured. Life changes, but structured settlements are not so flexible as they only provide a fixed amount of money every month, for a given period of time. But in case you need more money at a given moment, to take care of medical bills or other issues, then you can take advantage of the possibility to sell your structured settlement. But typically you can not use structured settlement benefits as a collateral for a loan. The reason is that the federal law designed to provide these benefits to you on a tax-free basis also prohibits you from assigning or encumbering them.

Don't get mislead by some advertisements saying that they will turn your cash payments into a lump sum. As stated in the law, structured settlements can not be traded back for a lump sum settlement, because you are given special tax treatment with regard to structured settlements' proceeds, and you cannot then take that in a lump sum fashion and invest it again. What these companies actually do is to buy your monthly payments, and instead of you, they would receive the payments just as you would have over time. But the whole trick is that they will buy your structured settlement for a far lesser amount than the gross proceeds than you would get over time. So the whole thing is that you will loose money in the long term in exchange for getting it sooner. Some people loose up to 50% of the total amount to be paid to them over the long run. If you should ever go to this route, make sure you negotiate and don't sell your structured settlement cheaply.

It's highly recommended that you use the services of a lawyer for all maters related to structured settlements. As a matter of fact, in some states, one is obligated to have a lawyer in order to acquire a structured settlement annuity.

Structured settlements provide a stable, periodic, tax-free income. A structured settlement can be sold for a lump sum. You can use the structured settlement money for whatever you want. A personal injury structured settlement is a form of financial compensation. Same goes out for structured insruance settlement.