Structured Settlement Vs Lump Sum

Exhausted yet triumphant, you’re finally at the finish line. You’re about to receive damages for medical malpractice. But how are settlements paid out? There are two methods. Your choices are structured settlement vs lump sum.

Is one way better than the other? Not necessarily. The best payout method is the one that suits your needs. Keep reading to learn more!

Receiving structured settlement check.

What Is A Structured Settlement Vs Lump Sum?

A settlement for a medical malpractice suit can pay for the following:

  • Past, present, future medical bills
  • Medical equipment and gear
  • Lost wages
  • Home modifications to accommodate your injury
  • 24/7 medical care 
  • Pain and suffering
  • Mental and emotional anguish
  • Loss of companionship
  • Lost quality of life

There are two ways you might receive compensation: a structured settlement payout or a settlement lump sum.  Let’s get to the basic definitions of each:

Structured Settlement Payouts

A structured settlement is when you receive the total amount of damages over time. For example, the defendant (usually the negligent doctor’s insurance company) pays you a certain amount each month. Those monthly payments will continue until they’ve paid the entire settlement you agreed to. Or, they might continue for the duration of your life. 

Sometimes with a structured settlement payout, you’ll get a large amount of money upfront. This allows you to pay any pending medical bills you might have. Then, you’ll receive smaller payments each month. 

Lump Sum Settlements

Now for lump sum settlements. These are, as their name suggests, a payout in one big lump. A single payment, in one fat check. Or, the money might be transferred to your bank account in the blink of an eye. With this payment, the case is considered settled. 

Does the lump sum settlement option sound more attractive? To many, it is–especially if bills are piling up from treatment you had to have thanks to a doctor’s negligence. You want to pay everything off and get out of debt fast. 

But there are some instances in which a structured settlement payout is going to be advantageous. So it’s worth taking a look at the advantages and disadvantages of both before you make your decision. 

Advantages Of A Structured Settlement Payout

Could a structured settlement be right for you? Below we’ve listed some of its advantages:

  • You’ll most likely save money on taxes. You’re probably thinking, “wait—I have to pay taxes on malpractice compensation?” Don’t worry. That’s unlikely. But here’s what you do have to pay Uncle Sam taxes on: interest/dividends. If you decide to invest some of your payout, that is. The more you invest and receive, the larger your tax obligation. But a structured settlement means less money in the bank at once, and a smaller tax bill. 
  • Those monthly bills? All taken care of. Your life looks different after your injury. And so do your bills. A structured settlement ensures you get an amount each month to cover your medical and living expenses.  If your condition is temporary, your needs are taken care of until you recover. If it’s permanent, your payments will likely keep coming each month for your entire life. 
  • Structure is savvy. Looking forward to a big cash waterfall? Don’t get swept off your feet! One disadvantage of settlement lump sums is the temptation to spend, spend, spend. But a slow trickle can lead to smarter financial planning. It ensures the money doesn’t dry up too quickly. 

Advantages Of A Settlement Lump Sum

Sometimes a lump sum is the way to go, especially if your payout is on the smaller side. Here are some advantages to receiving all your money at once:

  • Pay bills or large purchases. You need cash. You need it NOW. You have bills to pay, or you need to undergo an expensive surgery ASAP. That’s a good reason to opt for a lump sum payout. And it’s the main advantage. You may also want a lump sum to purchase a house or vehicle that better accommodates your condition. 
  • Avoid minuscule payments. Let’s say your settlement is a small amount, under $100,000. It’s most likely to your advantage to receive it all at once rather than get tiny deposits each month. 
  • Minimize your risk. Usually an insurance company handles the payout of structured settlements. But what happens if this company goes bankrupt? Your settlement will disappear along with it. This is why opting for a lump sum may carry less risk.

Structured Settlement Payout Plans

So you’ve debated structured settlement vs lump sum. You decided to go for a structured settlement payout. What will the payout plan look like? 

There are quite a few details you can negotiate, such as:

  • How long you want to get payments. (For example, for a certain amount of years, or your entire lifetime).
  • Whether you want to receive a lump sum at the beginning or end of your structured payment plan.
  • How large each payment should be. 
  • How often you’ll receive each payment (monthly, quarterly, yearly, etc). 
  • What happens if you die before the settlement is paid out. (Do you want your heirs to receive the rest?) 

You can discuss your options with your lawyer before you make your decision. They will help you form the best plan for your needs. Then they’ll negotiate this with the insurance adjuster. 

Oftentimes insurance companies put pressure on plaintiffs to accept settlements their way. But you shouldn’t have to settle for a settlement plan that doesn’t work for you. This is why having a knowledgeable lawyer on your side is so important. Speaking of lawyers, retaining a medical malpractice lawyer is our first tip to getting the largest settlement possible. Keep reading for more. 

Lawyer helping clients with malpractice settlement.

Tips For Getting The Best Malpractice Settlement 

Winning a case takes strategy. So does negotiating a settlement. So make sure you’re working with an attorney who has experience with personal injury payouts. Your lawyer will help you with the following:

Determine the minimum amount you’ll accept. 

Your lawyer will help you calculate your lump sum or structured settlement payout according to your economic and non-economic damages. You won’t divulge this number to the insurance adjuster. Rather, it helps keep a number in mind as negotiations begin. 

Don’t accept the first offer.

Insurance adjusters often offer low-ball amounts at first. They do this not only to try to pay as little as possible, but to see if you understand what your claim is worth. With a little patience, you can make counteroffers and arrive at an agreement that’s acceptable to you. 

Get the settlement amount in writing. 

You’ll need to create a confirmation letter that states the amount agreed upon during any in-person negotiations or phone calls. Your attorney can send it to the adjuster. This creates a paper trail that prevents the insurance company from going back on their offer. Also include details about any promises the insurance company has made to you about how and when payments will be made. 

Deciding between a structured settlement vs lump sum is made simple with an attorney’s help. If you’d like to speak with a lawyer about your settlement, contact us here.