What is a Structured Settlement?
A structured settlement is a negotiated settlement of a personal injury claim in which the defendant agrees to make certain periodic payments to the plaintiff in exchange for a release of liability. To construct a structured settlement, all parties of the claim negotiate an arrangement that matches a series of scheduled payments to the plaintiff's needs.
Typically, annuities from a life insurance company are purchased to fund the defendant's obligation of periodic payments. These funding vehicles can produce a stream of periodic payments to the plaintiff. Structured settlements can be very simple, while some arrangements can be quite detailed.
In general, structured settlements may have some or all of these elements:
- Guaranteed payments over a period of time.
- Payments over a person's lifetime.
- Security of a quality funding vehicle.
- No exposure to the ups and downs of the market.
- Periodic lump-sum payments.
- Funds to pay college cost.