Should You Accept a Lump Sum or Structured Settlement for Injury in Indiana?

Most personal injury cases do not end with a trial but with a settlement agreement. The terms of a settlement can vary from case to case, but often, you may have input into the form of your compensation.

Settlement payments may be made and accepted as a lump sum or a structured settlement. Each choice has its pros and cons, and the right option will depend on your unique circumstances and those of your case. A lump sum may be the preferred method if you need all of the money quickly. However, if your injuries demand significant compensation, a structured settlement might be the best option to recover the full amount you deserve and ensure that you have the financial resources you need now and in the future.

If you were injured and are considering a lump sum or structured settlement, our Indiana personal injury attorneys can help you determine which option will compensate you best. Contact Wruck Paupore at (219) 322-1166 for a free assessment of your case.

Should I Accept a Lump Sum or Structured Settlement for My Injury in Indiana?

When another person injures someone in Indiana, they typically seek compensation through an insurance claim. After negotiations between the parties, the victim may have the option of accepting a lump sum or structured settlement to compensate for damages. The option that is right for your case will depend on the circumstances of your injuries. Our Indianapolis personal injury attorneys are eager to help you choose the option that best compensates you for the harm you have suffered.

In a structured settlement, the negligent party agrees to pay the victim an agreed-upon amount at specific intervals. Usually, the money is paid to a third-party insurance company that then agrees to make regular payments over an extended period of time. This means you would receive a settlement check on a regular basis continuously, typically on a monthly basis.

Structured settlements are typically used in situations where there are serious injuries which may require ongoing medical care or where the injury victim is disabled and unable to work.

The majority of cases conclude with lump sum agreements, however. In a lump sum agreement, the defendant agrees to pay the victim the full settlement amount at once. Lump sum agreements are best suited for cases with less severe injuries, future medical complications are less likely, or there is no loss of the future ability to work. If your situation requires more money upfront and you cannot wait for a structured settlement to finalize, a lump sum agreement might be what is necessary. Additionally, insurers are sometimes reluctant to allow a structured settlement or the interest rate being paid as part of the structured settlement is too low to justify that form of settlement.

Our personal injury attorneys can review your case to help determine the best path to get the compensation you deserve.

Advantages of Accepting a Lump Sum or Structured Settlement for Injury in Indiana

There are advantages to both lump sums and structured settlements that make them suitable for certain situations. The extent of your injuries and your future needs will greatly impact which option is appropriate. This is a decision that should always be made in consultation with one of our Evansville, IN personal injury attorneys before accepting an agreement.

Lump sum agreements often work best when an injury victim needs the full amount of their compensation quickly, which may be the case if the victim missed some work after the accident and is behind on bills. If the settlement is relatively small, the full amount may be necessary as an immediate payment.

Because a lump sum settlement pays a victim in one installment, it is important to assess your damages accurately. Once an agreement is finalized, it cannot be renegotiated. After you receive your lump sum check, that money is yours to use in any manner you determine appropriate.

A structured settlement would serve better in cases involving larger settlement amounts. First, insurance companies are unlikely to allow a structure with a smaller amount. When the amount of payment is larger, insurance companies are more likely to allow a structure of payments. With a structured settlement, there is less risk that the money will spent while the injury victim still needs it and less risk that the money could be lost due to a poor investment.

Additionally, because personal injury settlements are generally not subject to federal income tax, the entire amount of your structured settlement - including interest being earned on the money - is usually exempt from taxes. On the other hand, if you accept a lump sum settlement, that amount is usually tax free but your investment earnings on that money is fully subject to federal income and capital gains taxes.

In serious cases, we will frequently recommend that our clients take part of their settlement as an immediate lump sum payout while structuring the remainder of that payment. Take for example a catastrophic case involving a client who has had both legs amputated. In that case, we might recommend that the client take part of the settlement as an immediate payment. This would allow the amputee to make modifications to their home - or build a new one - which is more handicap accessible. They might purchase a wheelchair accessible van and make other investments that will immediately improve their life. For example, we might recommend that they take several million dollars of a settlement immediately. We might then suggest that they put the remainder of the money into a structured settlement, which might pay them guaranteed tax free money every month for the remainder of their life.

Our Fort Wayne personal injury attorneys help our clients choose the option that best suits their need.

Drawbacks of Accepting a Lump Sum or Structured Settlement for Injury in Indiana

The disadvantages of lump sum and structured settlements are perhaps more important than the benefits. Understanding each option's limitations is a critical part of the settlement process.

Disadvantages of a Lump Sum Settlement

One of the major drawbacks to a lump sum agreement is that it might not cover future expenses associated with your injuries. Lump sum settlements can be alluring because they compensate victims quickly, but this works both ways. If you have complications during recovery or the expenses are higher than expected, you will be left on the hook for any expenses remaining after your lump sum runs out.

Additionally, it can oftentimes be difficult managing a large sum of money if you’ve never had to do so before. You will need to invest that money to make certain it lasts, potentially, for the remainder of your lifetime. Poor financial planning, or bad investments, can eat away at the settlement and once it is gone it is gone forever. We have unfortunately too often seen examples of injury victims receiving millions of dollars in settlement only to have the money gone within a few years.

Disadvantages of a Structured Settlement

As mentioned, a structured settlement might not be the best option if you need immediate payment of all of the proceeds. In a structured settlement, you will not have immediate access to all of the money. This can be both a disadvantage but also an advantage, as it does help ensure that the money will be there later when you need it. If you need to make a large initial expenditure, you may not be able to do so if you place all of the settlement into a structure of future payments.

Perhaps the biggest drawback to a structured settlement is the type of investment return you receive on the money. If the structured settlement is entered into at a time when interest rates are low - 2 or 3% annually - then the amount that you will be paid monthly will be much lower than if interest rates are higher - for example 5 or 6%. As interest rates rise, structured settlements become much more attractive, and when interest rates are lower, they become less desirable.

We work with some of the best structured settlement brokers in the industry and make sure that we obtain the most competitive interest rates available for our clients. We will typically obtain several options and will present them to our clients at the time of settlement. Typically, in catastrophic cases, we will recommend a hybrid approach which includes a lump sum payment of part of the settlement and structured monthly payments of the remaining amount. However, every situation is different and you must receive the advice of a qualified personal injury attorney.

Our Indiana Personal Injury Attorneys Can Help

If you have an Indiana injury case, a lump sum or structured settlement agreement could help compensate you for the damages you have suffered. For a free case review, call our Hammond, IN personal injury attorneys at Wruck Paupore. Call us today at (219) 322-1166.