Although, most people have at least heard the term “structured settlement” on television or have seen a print ad on the internet, there are many that still do not understand what it refers to. In fact, it is likely that most people will never understand structured settlements unless they happen to be in the process of seeking or receiving one.

A settlement of this type is equal to a contract which requires an insurance company to make periodic payments to someone who has suffered an injury, or to the surviving family member of a deceased person who has suffered bodily harm. There are two situations in which these types of settlements are primarily used, and they have become rather popular because they offer both the injured parties and the insurance companies a beneficial outcome.

At the most basic level, a settlement agreement of this type boils down to a financial package which allows for the full amount to be paid over a period of time, in regular intervals. This period of time may last for a person’s life span, or it may last for an appointed period whichever is agreed upon by the parties involved. Each settlement is tailored to meet the needs of the plaintiff, the defendant and possibly an interested third party. A settlement may order that the payee is to receive a certain amount of money upfront, to cover any damages that must be immediately treated.

One of the basic benefits of a structured settlement is that it allows for tax-free payments to be made over a period of time. This provides a sort of flexibility of the sort that cannot be matched even by common investment options such as savings accounts, real estate or stocks and bonds. That payments can be made over time is one of the settlement’s biggest attractions; payments can be made over the course of a payee’s life, and in the event that person dies, payments may be made to an estate or beneficiary.

Another reason why these settlements have become very popular is the fact that they are regulated by both the Federal and State governments. Even the IRS and Medicare/Medicaid organizations will take a structured settlement into consideration. These days, even lottery winners usually receive these types of settlements. Instead of receiving millions of dollars upfront, they instead are graced with payments over time.

Canada was the first country to implement these types of settlements, beginning in the seventies. The idea quickly spread to the court system in the United States, and now Australia and numerous nations of the European Union put such settlement agreements to good use. Of course, these kinds of settlements are not always in the cards for those who have suffered an injury. Instead, an individual may receive a lump sum settlement. This may be because that individual would prefer to receive their settlement all at once because they may just want to get their medical bills out of the way and call it a day.

Author Bio: Stewart Wrighter recently researched a landmarkstructured settlement case for an article. He learned that structured settlements are the best alternative in some cases.

Category: Finances
Keywords: structured settlement,structured settlements