Should I Take a Structured Settlement for My Workers’ Compensation Claim?

No matter your profession, all Nashville workers can be susceptible to job site hazards. Whether it is heavy machinery, dealing with hazardous materials or repeated strain activity, any profession can lead to bodily injury. If you are reading this article, you have likely suffered a job site injury and been granted workers’ compensation benefits, but here you must consider the next important question.

Once you and your trusted Nashville attorney have secured your workers’ compensation benefits, you will often have the option to choose between a lump sum settlement and a structured settlement. A lump sum settlement is where you receive all your compensation funds at once, in a single payout. A structured settlement is where you receive your compensation funds, over time, in increments similar to a biweekly paycheck. While both options have their benefits, it is important to carefully think about the pros and cons before making a decision.

What are the advantages of taking a structured settlement for your Tennessee workers’ compensation claim?

1. Stable income stream: Instead of receiving a lump sum upfront, you’ll receive periodic payments over a specified period or even throughout your lifetime. The primary advantage of the structured settlement is that it offers you a reliable and steady income stream. This ensures a consistent flow of funds, which can help cover ongoing medical expenses and living costs, providing financial stability. By receiving payments over an extended period, you can maintain a consistent standard of living and cover future medical costs, rehabilitation expenses and ongoing care. This stability can alleviate financial stress and allow you to focus on your recovery and or general well-being.
2. Tax benefits: Structured settlements often offer tax advantages. In most cases, the payments received through a structured settlement are tax-free, which means you won’t have to worry about paying taxes on your compensation. This can be especially helpful if your settlement includes money for medical expenses or disability-related needs because you can use the money without having to pay taxes on it.
3. Protection against mismanagement: A structured settlement can help people avoid spending their workers’ compensation fund too quickly. When you receive a large sum of money all at once, there is a necessity for careful budgeting, otherwise there is a high chance of making bad financial choices or being tempted to spend your compensation too quickly. With a structured settlement, you get your money in regular installments over time, which helps you manage it better and make wise financial decisions for a longer period.

The benefits for a structured settlement in your Nashville workers’ compensation case are clear and if you feel that your budgeting skills are reliant upon your paycheck’s limitations, this type of pay out will not disrupt your life and spending style.

What are the disadvantages of taking a structured settlement in a Nashville workers’ compensation claim?

1. Limited flexibility when in urgent financial need: One significant drawback of structured settlements is their lack of flexibility. Once the settlement agreement is finalized, you cannot modify the terms or access the funds earlier, even in the case of unexpected financial emergencies. This lack of flexibility can be a disadvantage if you require a large sum of money upfront for immediate medical treatments, debt consolidation, or other urgent needs.
2. Inflation and changing needs: Structured settlements may not account for the impact of inflation over time. While the fixed payments may be sufficient initially, the purchasing power may diminish as the cost of living increases. Additionally, your medical needs or circumstances may change, requiring a larger sum of money than initially anticipated. In such cases, a lump sum settlement would provide greater flexibility to adapt to changing circumstances.
3. Reliance on insurance company: With a structured settlement, you become dependent on the insurance company to honor the agreed-upon payments. While insurance companies are generally reliable, there is a small risk of financial instability or insolvency. If the insurance company goes bankrupt or fails to meet its obligations, you may face challenges in receiving your expected payments. For this reason, when committing to a structured settlement, it is crucial to research the financial stability and reputation of the insurance company.
4. Opportunity cost: Opting for a structured settlement will leave you missing out on the potential benefits of investing a lump sum of money if you see fit. By receiving a single large payment, you could invest or grow the funds through different avenues, such as stocks, real estate, or starting a business. Depending on your financial goals, a lump sum settlement may offer the potential for greater financial growth compared to the incremental payments of a structured settlement.

While the stability, tax benefits and long-term security provided by structured settlements are appealing, the limited flexibility, potential inflationary impact, reliance on the insurance company and opportunity cost should also be weighed. Our team at Rocky McElhaney Law Firm have extensive experience with workers’ compensation cases and testimonials of local clients who, with our help, succeeded in securing the compensation they deserved to keep their family afloat in hard times.

If you have yet to file your workers’ compensation claim but have recently suffered a Nashville job site injury, Rocky McElhaney Law Firm is here to help. Do not delay in getting legal assistance and do not go about this complex process on your own. Our tenacious team of experienced attorneys can help optimize your workers’ compensation claim by knowledgeably navigating through the process. We are eager to fight for your rights as you recover from your workplace injury. No matter where you are in your workers’ compensation claim process, contact us today at any of our convenient Nashville, Hendersonville, or Clarksville locations for a free consultation.