Structured Settlements: Why They Are Important to Financial Security

When tragedy strikes, many families turn to an attorney in hopes of capturing damage recovery from an insurance company or at-fault third party. For some, third party liability leads the way into a law suit, settlement or agreed judgment in recovery of monetary damages. Unfortunately, for some attorney clients, the process by which settlements are handled is often confusing and leaves the client in a quandary, unsure if the monetary terms of settlement are appropriate enough to provide the adequate compensation based on the traumatic event. For individuals who experience the third party settlement process, understanding the financial tool often used in settlement proceedings, known as the structured settlement, will provide for a more confident understanding of the settlement process.

Structured settlements are a unique legal and financial tool which is commonly used in the United States as well as many other progressive countries. In history, prior to the use of structured settlements in the resolution of third party law suits, insurance carriers were required to pay out large sums of money to a plaintiff only to find the plaintiff, with unlimited discretionary use of the monies, would utilize the settlement funds for payment of items unrelated to the original principles of the law suit or tragic accident. Following lack of discretion, many plaintiffs would find the settlement monies would be spent, leaving many years of unpaid services for which the settlement monies were originally intended, i.e. medical expenses.

In an effort to assist the plaintiff in obtaining some control over the financial gain from a third party lawsuit, the federal government began to recognize structured settlements as a unique alternative to the lump sum payment. It is through the structured settlement that the plaintiff, as well as the defendant, can reach an agreement not only in terms of dollars but also, to some extent, how those dollars are applied.