Structured Settlements

Structured Settlements typically arise from a claimant and a defendant that have agreed to nullify a lawsuit. Instead of proceeding with the lawsuit, the two parties agree to settle out of court, avoiding court fees and decisions of their peers. In essence, structured settlements are designed to allow a defendant to make payments over time instead of all at once.

Depending on the grievance that was filed by the claimant, the defendant may not have enough funds to cover the cost of all the expenses. Expenses that are commonly included when determining a structured settlement agreement are the cost of medical bills and emotional trauma. Other expenses that can be included are miscellaneous expenses, such as transportation costs, certain bill payments, and certain insurance issues.

Unassigned Cases & Assigned Cases of Structured Settlements

Most structured settlements are divided into two categories. The most common structured settlements are unassigned cases and assigned cases.

Unassigned Structured Settlements

Unassigned cases involve the defendant and the defendant’s insurance company directly. Insurance companies that are involved in unassigned cases will simply buy an annuity from an organization such as a life insurance company. This purchase will serve as a counterweight against the money that it is required to pay in the structured settlement. Instead of the insurance company paying the claimant directly, the annuity from the life insurance company is directed straight to the claimant, leaving the defendant free to deal with any other problems that may arise from their insurance company while the claimant continuously receives the money due from the structured settlement.

Assigned Cases

Assigned cases arise when the insurance company of the defendant does not want to make payments for a prolonged period of time. The insurance company of the defendant will pay a chosen third-party organization a lump sum of money. This amount must be enough for that organization to purchase an annuity from a life insurance company. The third party organization will then serve as the payer of the structured settlement to the claimant. At this point, the defendant and his/her insurance company is free from any obligation concerning the structured settlement. By transferring the responsibility of payments to a third party, the defendant’s insurance company will not have to worry about long term payments that would normally be with them for years.

In short, structured settlements allow many people to receive compensation for a negligible act in increments to be determined, instead of all at once. This system is generally preferred by both parties due to the ease of making smaller payments.