When you are injured in an accident and file a personal injury claim, you may be offered a structured settlement. A structured settlement is an agreement between you and the at-fault party (or their insurance company) in which you agree to accept periodic payments instead of a lump sum. structured settlement payout is often used in cases where the victim is a minor, or when the injuries are expected to result in long-term or permanent damage.
While a structured settlement can offer many benefits, there are also some disadvantages to consider.
1. You May Not Receive the Full Value of Your Claim
When you accept a structured settlement, you are agreeing to accept a lower overall payout than you would if you accepted a lump sum. This is because the at-fault party (or their insurance company) is only agreeing to make periodic payments, and not to pay the full value of your claim all at once.
2. The Payments May Not Be Enough to Cover Your Expenses
Another disadvantage of a structured settlement is that the periodic payments may not be enough to cover your expenses. This is especially true if your injuries are severe and you are unable to work. If you need to cover medical bills, lost wages, and other expenses, a lump sum settlement may be a better option.
3. The Payments May Not Be Tax-Free
Another disadvantage of structured settlements is that the periodic payments may not be tax-free. This depends on the state in which you live, but in some states, the periodic payments may be considered income and subject to taxation.
4. You May Not Be Able to Access the Money if You Need it
If you agree to a structured settlement, you may not be able to access the money if you need it. This is because the payments are typically made over a period of time, and not all at once. If you have an emergency and need access to the money, you may not be able to get it.
5. You May Not Be Able to Sell the Settlement
If you need to sell your structured settlement in order to access the money, you may not be able to do so. This is because the payments are typically made by an annuity, which cannot be sold.
6. You May Have to Pay Fees
If you decide to sell your structured settlement, you may have to pay fees. These fees can include an attorney’s fee, a court filing fee, and a fee to the company that buys the settlement.
7. The Payments May Not Be Guaranteed
Another disadvantage of a structured settlement is that the payments may not be guaranteed. This means that if the at-fault party (or their insurance company) files for bankruptcy, you may not receive the payments.
8. You May Not Be Able to Change the Payment Schedule
If you agree to a structured settlement, you may not be able to change the payment schedule. This means that if you need to access the money sooner than the payments are scheduled, you may not be able to do so.
9. You May Have to Wait for the Payments
Another disadvantage of a structured settlement is that you may have to wait for the payments. This is because the payments are typically made over a period of time, and not all at once. If you need the money right away, a lump sum settlement may be a better option.
10. There May Be a Penalty for Early Withdrawal
If you agree to a structured settlement, you may be charged a penalty if you withdraw the money early. This is because the payments are typically made by an annuity, which has early withdrawal penalties.
While a structured settlement can offer many benefits, there are also some disadvantages to consider. If you are considering a structured settlement, be sure to weigh the pros and cons carefully to make sure it is the right option for you.