Structured Settlement – What is it & How does it work?

A Structured Settlement is a legal settlement where a defendant agrees to pay the periodic settlement amount to the plaintiff over time. Mostly the settlement ends up among the parties itself. The settlers usually split up the sum into an annuity, that is periodic income to the plaintiff throughout the life. The annuity is never owned by the payee but owned by the defendant’s insurance company. The structured settlement can also be obtained as a lump sum instead of receiving it for years; this is preferred by many as it can be spent or invested.

Structured Settlement

Structured Settlement

See also: How to sell my Annuity Payments?

At times, the recipient of a structured settlement will seek out someone to buy the settlements, and the structured settlement company pays the consumer a lump sum in exchange. This benefits both the company and the buyer as the buyer can benefit by accessing the money and the company by taking up a discount. The Structured Settlement has been a favorite solution for personal injury and unfortunate death cases for past three decades.

The Structured Settlement Process

The process of structured settlement is a bit complicated but results with a better and easier solution for the winner. The trained consultants work on both the sides to determine the amount to settle the plaintiff. Then the consultant tries to buy an annuity from the life insurance company. The annuity is protected from the market fluctuations, recessions, and other risks associated. The plaintiff receives a periodic settlement in this case. According to the National Structured Settlements Trade Association, nearly 6 Billin dollars are issued for new structured settlements every year.

Structured Settlement Process

Structured Settlement Process

Types of Structured Settlement


In the case of direct funded companies, the sources of capital are their own, and hence decisions are made freely on the purchase of settlement payments. Other companies that do not have direct funding may lead to some delays as they are dependent on a third party to guarantee to fund.


A maturity broker also known as the structured settlement broker is a professional trained in structured payments. Brokers involve in the whole process of obtaining the advance or the full payment against the settlement.

Federal Laws and Regulations of Structured Settlement

The structured settlement issuing and selling are regulated by all national and state level laws and regulations. The Periodic Payment Settlement Act was passed in 1982, formulated the structured settlements in personal injury lawsuits. This law excluded structured settlement from federal, state and local income taxes. As the individuals would be spending the lump sum over time and not in a short period, thus the financial structure becomes stable.

The Federal law approves the transfer of structured settlement payments in all states. The Justice evaluates every case to make sure they get the best standard. The Justice will ask a series of questions to the plaintiff to make sure that he/she knows the consequences of selling the payments and is financially secure after the transfer is complete.

Structured Settlement

Structured Settlement

Certain states don’t have the Structured Settlement Acts, but the owners can still able to sell their payments with the insurance company. Some states have even stricter regulations and are typical in places where there is a larger at-risk population with structured settlements.

Structured Settlement Cases

Personal Injury: The more severe the personal injury is, the more likely you would get a structured settlement instead of a lump sum.

Worker Compensation: When you are get hurt during the job, you can be awarded a structured settlement to compensate your loses.

Wrongful death: When it is proved that someone is at fault, the family members of the person can get a structured settlement.

Right to sell your Structured Settlement

Everyone who owns a structured settlement has the right to sell their structured payments. Various reasons like force closure, lack of transportation, etc. make many structured settlement owners to sell their payments. Whenever a structured settlement is set up, it is made to meet the needs of the injured or the concerned person. But sometimes the owner is in a situation to access the money right away. Selling those future payments helps someone get the money they need immediately.

The Federal and State Laws are there to protect the consumers against fraudulent companies. People tie up with the companies that purchase the structured settlement funds in exchange for a lump sum to access the money. Unfortunately, the companies prey on the people who are in delicate position.

Keep in mind that you have bear all of the end-of-deal fees in writing and compliance fees passed to you.

Comment below your queries on Structured Settlement guide and discuss below.

Author: hareshperiyasamy

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