A personal injury structured settlement is, in a nutshell, a monthly or yearly payment made to a defendant, or injured party after a judgment is made in their favor. The individual or company responsible for the injury must make a payment to the injured party for a specific number of years, totaling the awarded amount.
Sounds nice, doesn't it? Having a monthly check come in without having to work for it? But what many people fail to understand is that for the injured party, there has usually be a loss of income, many times the loss of income has been extended if the injured party has become permanently and totally or partially disabled. Applying for disability income is a long arduous process that can take many months, and sometimes a few years to start. And, medical bills have been piling up, as well as other bills and living expenses. Suddenly, those meager monthly payments don't look like much at all.
So, how can a person get access to their settlement funds more quickly than ten or twenty years? The answer is, a structured settlement funding company. There are many companies and individual investors out there who would gladly trade a single, discounted lump sum payment now in exchange for your meager monthly payments for the rest of the term.
When you choose to have your settlement payments converted into one lump sum, the amount you receive is substantially reduced. This is because the value of future money is less than money at hand today. This is due to inflation. Everyone knows that what costs $1 today will cost $2 in a few years, so future dollars will not go as far as today's currency.
With all that being said, you have to determine whether or not it makes sense to convert your monthly payments into a lump sum based on your personal needs. It might make sense to sit down with a structured settlement broker or financial adviser to discuss all your options before obtaining the services of a settlement funding company. It may make sense to give up a portion of your award in order to keep your house and pay your medical bills, but if you are relatively financially stable, it may not be beneficial to give away a substantial portion of your money in order to purchase things you may not need.