You’ve been injured at the fault of someone else, and now you need to protect yourself and get the settlement you deserve.
Personal injury settlements help you cover your medical costs, lost wages, and pain and suffering so you can get back on track after being hurt. But how much actually ends up in your pocket, and how are personal injury settlements paid out?
If you’ve suffered an injury, read on to find out what you can expect.
Where Does the Money Go?
You’ve taken your case to court, and you won. Congratulations! But even though winning your settlement is an important accomplishment, you don’t actually get to pocket all the money earned.
There are some other entities that need to be paid from your settlement first.
The first place some of your settlement money will go is to the hospitals, clinics, and other medical parties who you owe. You likely needed medical care after your injury, which racked up bills that should be prioritized first after your settlement is decided.
You may also have some medical liens, where medical services were provided but were allowed to remain unpaid until your injury case closed. Other non-medical liens can include mechanic liens, employer liens, and health insurance liens. These will all receive a cut of your settlement automatically.
Next, legal and attorney’s fees will be deducted. As long as you work with a personal injury lawyer, you will be responsible for paying them their percentage of your settlement.
Other legal fees can include case costs, settlement deductions for things like medical records, postage, and copying documents.
Finally, settlement money is often subject to taxation. You will be responsible for setting aside a portion of your settlement for taxes, depending on the terms of your settlement.
After paying the necessary fees and debts, you are eligible to receive the remaining portion of your settlement. According to one website, one in four people received over $25,000, and working with a lawyer earned them more despite having to pay attorney’s fees.
How Are Personal Injury Settlements Paid Out?
How you receive your settlement payout is up to you. There are two main options: lump-sum payments, where you receive the money all at once, or installment payments, also referred to as a structured settlement.
In some cases, the two are evenly combined. For example, you may receive one initial lump sum before receiving installments later. This initial lump sum can help you start paying off bills that are already mounting.
The opposite is possible, too. If a child is involved in your personal injury lawsuit, for example, they may be eligible to receive regular installments until they graduate or become an adult. Then at that time, they can receive a final lump sum payment equal to the remaining portion of the settlement.
Each has its own benefits, as well as drawbacks to consider and discuss with a lawyer.
Pros and Cons of Lump Sum Payments
Lump-sum payments can be satisfying to receive because you have access to all your money at once.
And if you’ve been out of work due to your injury and are already behind on bills, a lump sum payment may be a better option over smaller installments.
But lump sum payments can be harder to manage, and if you’re not used to budgeting a large amount of money, it’s all too tempting to overspend it too soon.
On the other hand, if you’re skilled at managing investments and saving when needed, a lump sum can be advantageous, allowing you to get ahead on your finances instead of waiting for smaller, individual payouts.
Pros and Cons of a Structured Settlement
Many personal injury cases will end in a structured settlement, rather than a lump-sum payment. This is partly because many injuries require continued medical care. And without regular installments arriving month after month, you may not have the funds to pay for treatment later on.
But because each payment is relatively small, you also may be less financially equipped to handle an emergency or unexpected bill. Overall, you’ll face more limitations than if you receive more money at once.
Choosing a Payout Type
Ultimately, the choice is up to you and your attorney to decide which type of payment is best for you.
Consider your financial needs, spending habits, and medical costs to determine how you want your settlement to be paid out.
What If I Need More Money?
Once personal injury cases close and the payment type has been decided, there’s usually no room to reopen them to try to gain more money.
With the help of personal injury lawyers, discuss how much debt and other injury-related costs you have, and decide how much you’ll need to receive from your settlement in order to be comfortable.
That way, you can avoid running into the problem of wishing you had more settlement payments coming in once it’s already too late.
Receive the Personal Injury Settlement You Deserve
If you’ve suffered an injury that wasn’t your fault, you may be eligible for a personal injury settlement.
But how are personal injury settlements paid out? After paying necessary fees and medical costs, how you receive your settlement is up to you. Lump-sum and installment payments both have their own pros and cons, depending on your unique situation and needs.
After receiving your settlement, why not invest your money in a lucrative business or stock? Read our business and finance articles for the latest advice!