Structured settlement otherwise called periodic settlement is a financial arrangement. It was first introduced in 1970’s in Canada and United States of America. It is now an integral part of the statutory law of many common law countries including Australia, Canada, England and United States. Structured settlement has its own definition, rules and standards in each of these of countries even though some uniformity exists. What we often see is that a plaintiff settles a case for large sum of money, the defendants in association with the settlement will propose paying the settlement in parts over a period of time rather than the entire sum. But have we ever realized that what we are doing here in a settlement? Yes a Structured settlement pays you in installments over time instead of single lump sum.
To elucidate the concept further lets take an example. Suppose you have a form of occupational disease caused by asbestos called asbestosis. In this case you sue the asbestos manufacturer who in turn agrees to settle out of court for a million dollar. Here another option would be to go for part payments i.e. Structured settlement. This arrangement can be structured in umpteen numbers of ways to suit your need according to your circumstances. Many at times, Settlement will be created through buying annuities which guaranty future payments. Now, why is this so prospective? Firstly, you are guaranteed a source in income for life. Another significant advantage is avoidance. You can evade spending time and money on unending court proceedings. Minors may benefit as well, such as a settlement which provides for some cause during their youth like viz. educational expenses. An injured person with long term special needs can be benefited through periodic lump sum payment for the purchase of medical equipment.
As every coin has two sides Structured settlement too comes with its disadvantages. Sometimes those who opt for it might feel trapped when they find that they cannot use the money lawfully entitled to them. They may wish to purchase a new home or any other high involvement item yet might not be able to gather the resources needed for it; since they cannot borrow against future settlement.