A structured settlement is a way to pay compensation to a victim of an accident, on a periodic basis. Structured settlements can either be paid in regular installments for a fixed period of time or for the claimant's lifetime. It is seen as the best form of settlement, because it caters to a claimant's need for security in an effective manner. It also provides better financial benefits over a period of time compared to a single lump-sum settlement. Structured settlements are also advantageous, as they make the beneficiary of the settlement eligible for tax breaks. In certain cases, an initial large payment is made to cover expenses. In the case of structured settlements, annuity purchased from a life insurance company typically provides the funds required for making the payments.
The parties involved (the victim and the party sued) make a contract with a settlement payment provider. A settlement payment provider is a company that is usually affiliated with a life insurance company. The settlement payment provider is paid the lump sum settlement amount by the sued party, which it pays to the victim on an installation basis over a pre-determined period of time. The processing time may vary from four weeks to four months, depending upon the court's calendar.
In most cases, the payments are made on a monthly basis. However, this can be changed according to the victim's needs. In certain cases, specific conditions may be included to increase the payments periodically, or additional payments may be made if the need to do so is identified in advance. The stipulations of a structured settlement can not be changed at a later date. It is also not possible for a victim to get interest on the balance settlement amount, as the settlement is tax-free. In cases, if a victim needs a lump sum of money immediately, he may sell the settlement agreement much like a stock. However, this is not always possible and will depend on the state where the agreement is being signed.