Legal Guide

What Is a Structured Settlement in a Lawsuit Loan?

When you resolve your injury claim, the at-fault party’s insurance company will issue payment. In most cases, you will receive a lump sum amount. However, when it’s a large settlement, they may ask about a structured settlement. If you’ve never heard the term before, you may be searching online for, “What is a structured settlement?” When you have a personal injury attorney representing you, they will walk you through all your settlement options, including a possible lawsuit loan.

What Is a Structured Settlement?

A structured settlement is a series of payments made over time for your injury claim settlement. The main benefit of a structured settlement is to help plaintiffs maintain some financial security rather than give in to temptation and spend the entire lump sum at one time. Structured settlements are typical in personal injury, medical malpractice, workers’ compensation, and wrongful death cases.

When you opt for a structured settlement loan, you can elect to receive payments immediately or start them later on. If you have outstanding medical expenses or lost your job due to your injuries, you may want to start receiving payments soon. Other recipients prefer to defer payments until they are older, so they have financial security when they are retired.

How Do Structured Settlements Work?

Structured settlements make periodic payments through an annuity. The plaintiff and defendant’s insurance company work with an assignee to set up the structured settlement terms. The terms need to address aspects of the settlement like:

  • How much regular payments will be;
  • How long payments will continue;
  • Whether payments will progressively increase down the line; and
  • Whether there will be larger payments at specific intervals.

You can arrange for an immediate lump sum to cover attorney fees too. Once there is an agreement on the terms, the qualified assignee will purchase the annuity from a reputable life insurance company. After the terms are set and the annuity is purchased, there is no way to change it. As time goes on, your structured settlement annuity will earn some interest, which will protect the value against inflation.

If someone needs to get funds from the annuity earlier than the schedule dictates, the only option is to sell the future rights.

How Do Structured Settlements Work with Lawsuit Loans?

A lawsuit loan, or lawsuit advance funding, is an option for people to get an advance on the settlement amount they expect to receive. These funds can be used for bills and expenses while you wait on the rest of your money or your lawsuit loan is pending. Lawsuit loans apply only to cases that are in the pre-settlement phase. For a lawsuit loan, you also need to qualify and meet eligibility requirements.

If you want to get a loan after negotiating a structured settlement, it’s not the same process. Owners may sell a portion of their annuity to a structured settlement buyer. That buyer then gives you an advance on your settlement. The money is yours, so you do not need to provide collateral or have a co-signer. The company will pay you a large lump sum for the portion of the structured settlement they purchased. Because the buyer is buying your settlement, it will stop the regular annuity payments for some period of time. A judge will need to sign off on the purchase of a structured settlement.

Even though there are eligibility requirements, applying for a pre-settlement lawsuit loan can be a better option for many people. Lawsuit loans also don’t require the same court scrutiny that structured settlements do. If you have an attorney representing you, they will explain the nuances between pre-settlement loans and structured settlements and advise you which one is better suited for your situation.

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