It’s often been debated as to whether structured settlements are preferable to lump sum payments. Generally, the particular situation in question is considered while weighing the pros and cons. But by and large, the general view is that structured settlements are better than lump sum payments for a number of reasons.

In the case of accidents and injuries, people usually resort to lawsuits to try and recoup the damages sustained as a result of the accident. Structured settlements were not always an option. It is a concept that’s been around for only 20 years or so. Before that, if you won a lawsuit, the settlement was in the form of a lump sum cash payment. The idea behind the lump sum payment was that the victim could invest the money sensibly so as to obtain a decent amount for the rest of his life. Alas, this was not always the case. Thereafter, the concept of structured settlements came into existence wherein the award would be spread over a period of time and the plaintiff given money periodically (i.e. monthly, quarterly, yearly etc.) The manner of distribution of payments was decided and was called Structured Payment Annuity.

Structured payments give a sense of financial security to the plaintiff since he is assured of a fixed periodic income. This is the most suitable in case of kids. Children are not always in a position to comprehend the extent of damage caused and the repercussions of that damage. Getting a structured settlement in this case makes sense so that they get a fixed sum of money throughout their lifetime. Moreover, the award amount in some cases is massive especially where the damage to the child is grave, irrevocable and in some cases even permanent. In this case, to prevent misappropriation, sometimes structured payments are more beneficial.

Even if you get a structured settlement, and find yourself in dire straits financially, you have the option to sell of the settlement to a third party and get cash immediately. Moreover, you can choose to sell it either partially or completely. So, if you ever find yourself in a crunch, there are many companies who are willing to buy structured settlements from you in exchange for lump sum cash. Just be cautious and do your research to get the best deal.

Structured settlements are also a better option for insurance companies and others who have to bear the burden of a huge settlement award. They can reduce their burden by making staggered payments rather paying bulk cash upfront.

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