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Structured Settlement Personal Injury Agreements: How They Work

Updated on June 1, 2011

Structured settlement personal injury agreements are one of the best means of providing the financial support and restitution that victims of personal injury deserve. The practice has come to be widely accepted as a way to hold responsible parties and their insurers liable for negligence and actions that cause personal injury. For the victim, though, structured insurance settlement agreements can be confusing, making it unclear as to whether their best interests have actually been served. This brief overview aims to make things a little clearer, and help victims of personal injury understand their rights a little better.

How Structured Settlement Personal Injury Agreements Originate

A structured settlement in the case of a personal injury suit (which also extends to wrongful death and similar cases) originates from the liability of the responsible party. In layman's terms, that means that when a person causes personal harm to you—either by direct action or by their negligence—they are held liable. However, as personal injury victims know all too well, there is no way to compensate for the resulting injury and harm done, so the only relative recourse is to make the offender take responsibility and to compensate financially.

What happens after it is agreed that the responsible party is guilty of an offense or negligence is that an agreement is reached for monetary compensation and damages. The determination of guilt may be reached through settlement with the offender's representatives, or through a court proceeding. In most cases the party that is held financially responsible is the guilty party's insurance company and they are the ones who must arrange to pay the victim.

How Victims Get Paid Through Personal Injury Structured Settlement Agreements

Structured settlement awards to personal injury victims are usually fairly large (as they rightly should be to compensate for lost wages, time, suffering, damages, and possible disabilities). The way that insurance providers meet their financial obligations to injured parties is to buy into an annuity and pay the judgment out over time. The amount of money that the annuity is purchased for is actually far less than the total amount of money that will be collected by the personal injury victim. The payments to the injured party are made on a regular schedule (monthly, etc.) over time from a combination of principal (the amount the insurance company invested) and interest (to make up the difference for the payee). These payments usually go on for years until the full amount of the judgment has been paid.

Accounting For The Needs Of Personal Injury Victims

The amount of the award in a structured settlement personal injury case will be decided at the time the agreement is reached. It will depend on many factors, including

  • The extent of damages or injury
  • Loss of function
  • Impact on the life of the victim
  • Inability to work (either during a recovery period or afterwards or both)
  • Bills and debts incurred as a result of the injury
  • Financial needs of the injured party

Theoretically, the award should account for all of these factors and others pertaining to the case, and should provide the financial means for the victim to live comfortably again. However, there are times when unforeseen expenses cannot be adequately accounted for, and that is why the courts now allow transfers for selling structured settlement payments in exchange for large lump sums of cash (through third-party investors, not through the original payer).

The system of restitution devised by structured settlement personal injury agreements is not perfect, but it is one of the only solutions in personal injury cases. In the best of circumstances these contracts place the responsibility for wrongful actions on the guilty party and their representatives, and provide a, albeit imperfect, way to compensate for damages done.

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    • Hello, hello, profile image

      Hello, hello, 7 years ago from London, UK

      I had a very heavy fall on the pavement. Fractured my hand, injured my knees and still not right after five year and difficulty of walking, lost some teeth. I got a lawyer through the famous National Injury helpline and had to chase him all the time. He sent me to a 'specialist' to assert the damage. That 'specialist' discovered that I had a fatty lump removed many year before and said that that it caused it. According to him I had athritis. I lost it and got £4000only. I am still having health issues all over. I was very healthy before because I had a huge allotment and walked 20 minutes there and 20 minutes back. That so-called 'specialist' would not accept it.

    • 50 Caliber profile image

      50 Caliber 7 years ago from Arizona

      Good information, stuff I had wonder about, thanks 50