Settlement Payments are Passive Income you Might not Handle Well

Payments are an essential part of any settlement, whether it is lump sum or staggered over a time period. Settlement payments may come in various situations like a physical injury, a work man's company claim or tort, or an awarded compensation in a legal battle following physical injury.

In the recent years, structured settlements, a form of monthly payment over the long term, became very popular because of the benefits for both the paying and the receiving parties. Structured settlement is usually used when a sizeable amount of money is involved in the settlement of a claim where the paying party has a difficulty of raising the needed amount upfront. Lottery winnings are in fact paid under this same form of plan as well.

When your settlement comes to an agreement that a series of structured payments will be provided over a period of time instead of a lump sum, you are now guaranteed a passive source of income. The claimant now receives monthly compensation for a period of few years up to a whole lifetime instead of a single payment.

This guaranteed big amount spread out over a period of time will surely compensate for the loss of the claimant like a disability. For their part, it usually means a fund for medical expenses and the like.

With such a guaranteed amount, most people are not still satisfied and would want the bigger instant cash. That is why this form of payments is even endorsed with lottery winnings to protect people from their own selves.

Most people cannot handle a sudden huge financial change. Money will only be spent wildly and mostly expended on the non-essentials. This will only worsen their situation over the experience which will supposedly make their lives more comfortable. Most people who experienced such sudden change were left worse off in just a few years than they were before the large amount arrived in their lives.

The very purpose of paying the compensation as a structured settlement is to keep the claimant or recipient from worrying over the management of a large sum of money at once. In the specific case of an injury claim, the insurance company of the paying party keeps the money into an annuity.

In some special cases, part of the money is paid up front to the claimant. This is especially true with health-related cases like an injury claim where there is an immediate need for medical expenses. The remaining big chunk is distributed over the regular payments over the agreed time period.

A structured settlement can assure the recipient guaranteed income over a long period of time. A recipient should always treasure such passive income and must use it to secure his or her future by using it wisely.