Structured Settlement vs. Lump Sum


When you prevail in a lawsuit against someone or a company that has injured you, you may receive payment in the form of a structured settlement vs. Lump Sum payment to compensate you for the harm. This payment can be in any form either in the form of cash, bank transfer, or in the form of an annuity. Moreover, this payment is always in a lump sum form. However, if you want the payment in the form of installments or the company wants to give the payment in installments, then it is called structured settlements.

Both forms of payment have benefits and disadvantages that you should weigh in determining how you would like to be paid.

Lump-Sum Payment method

When you settle a lawsuit, you may receive either a lump sum or a structured settlement. A lump sum is the simplest way to receive damages. It is a single payment with all the money being received at once.

The one-time payment would satisfy the other party’s obligation in full. The settlement could also involve a set number of lump-sum payments. In this setup, a whole amount after a period of time is transferred to your bank account.

The company fulfils its promise according to the judgement of the lawsuit. However, sometimes people deal directly instead of going to the courts. This payment will help you pay the bills at once and you can invest the rest anywhere you want.

Structured Settlement vs. Lump Sum Pros and Cons


  • You can spend the money in any way you like and whenever you want.
  • Through the lump sum payment option, you have a lot of money in your hands to start anything new.
  • This can help you manage your investments or starting a business or fulfilling your dreams.


  • No second chances are present in this kind of deal, so if you lose the money, you are not getting anything afterwards.
  • The investments which you think would end up well might even fail.

Structured settlement

Structured Settlement Vs. Lump Sum
Structured Settlement Vs. Lump Sum

A structured settlement is when you receive your injury settlement in smaller, periodic payments instead of with one, large payment. You receive the settlement funds over an extended period of time rather than shortly after the settlement. A structured settlement may vary in how often you get paid and the amount of the payments. You may receive payments for years in the future.

While negotiating a structured settlement you always have the upper hand on the company that will pay it. At that moment you might ask for an upfront payment of at least some of the amount and the rest in the form of instalments. In this way, companies feel better to pay something right away and the rest of the amount in the form of instalments. Moreover, you can also ask the company to increase the instalments payments so that you can make your ends meet with it.

If you resolve your case with a structured settlement, the settlement fund usually goes to a third-party insurance company to manage. The responsible party calculates how much they need to pay to fund the settlement. It’s a complex calculation. Because the funds can increase with investments over time, the responsible party typically pays in an amount that’s smaller than what you actually receive in payments.

Some of the terms to think about for your structured settlement vs. lump sum may include:

  • The number of payments that you will receive.
  • The frequency of payments or the number of installments.
  • How long you want to receive payments, for example, in years
  • Whether there’s a larger payment up front, if yes how much.
  • If there’s going to be a larger payment at the end, if yes then after how many years.
  • Whether the payments increase or decrease over time (depending on the conditions of your life)
  • If payments terminate on the death of the recipient or continue for a set period of time

Main Difference between Structured Settlements vs. Lump sum

The difference between lump sums and structured settlements is a structured settlement payout takes place over an extended period of time. A structured settlement vs. lump sum involves a schedule of income-tax-free payments received in installments. An example of this would be every month for 20 years.

Structured Settlement Pros and Cons

Consumers should be aware of the upsides and downsides of structured settlement payments before making a funding decision.


  • It guarantees that you will pay to get enough amount to pay your expenses.
  • It is for a longer period.
  • You can always fall back on to the next payout if your investments fail.
  • You have less pressure to give the money away.


  • The bad thing is that you have no access to most of the payments/settlements.
  • In the case of settlements, you might not be able to pay all the unexpected bills because of the little amount in your hands.

Structured Settlement Lump-Sum Hybrid

In some cases, the two forms of payment may be combined to meet the needs of the plaintiff. In these cases, the plaintiff may receive a large payment to meet immediate needs and pay bills, followed by a series of payments scheduled overtime.

Turning Your Structured Settlement into a Lump Sum

Well, this can be done easily. The plaintiff can negotiate with the company while the contract is in the making of such a deal. In this deal, he can ask for a lump sum in the start a good amount of money to pay the medical or other such bills. While converting the other half of the money into structured settlements to get them for a longer period.

If you have a structured settlement, you may find yourself in need of a larger amount of immediate cash than your settlement pays. The reason is you will have to pay some unexpected bills and other such payments. If you kept on waiting for the next payout, you might lose things in this case. That is why it is always good to go for the hybrid payout structure.

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