How can I tell if a structured settlement is right for a particular claimant?
First, keep in mind that the entire settlement amount does not have to be used to provide for future periodic payments. It is almost always important to receive some of the settlement proceeds in immediate cash. But structuring a portion of a settlement will be in a claimant’s best interest if any of the following apply:
- Claimant is incompetent or a minor
- In fact, laws in many states limit the investments that can be made on behalf of such a plaintiff. Annuities are almost always preferable to the other available investments.
- Claimant is uncomfortable or inexperienced managing and investing large sums of money
- With an annuity, the life insurance company assumes both the responsibility and the risk of investing the claimant’s money.
- Claimant has a conservative nature (i.e., claimant is not interested in investing in the stock market)
- A structured settlement annuity is not a capital appreciation investment. Rather it is meant to provide absolute income security that protects the claimant from ever running out of money.
- Claimant desires consistent and guaranteed income (e.g., income replacement or lifetime medical care)
- Claimant needs lifetime income
- Claimant cannot risk depleting his or her money (e.g., claimant needs lifetime medical care and settlement proceeds are the only monies available to pay for care)
- Claimant lacks self-discipline (i.e., spending cash settlement too quickly and/or wastefully)
- Claimant is a minor and there is a concern with providing too much money too soon to the claimant.
- Payments can be deferred until a claimant is older and likely to be more responsible.
Structured settlements are not a panacea. They are not suitable for every case involving personal injury or wrongful death. However, they are a very valuable tool in many cases, and can provide benefits that no other investment option can match.