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Quick money now or structured settlement?


March 21, 2012

The amount of money at stake in catastrophic accident benefit claims can be very significant. Millions of dollars can be required for future attendant care benefits, future medical/rehabilitative benefits or otherwise.

An insurance company is under no obligation to lump out your accident benefit claim. If you die in 5 years, then why should an insurer be on the hook for payment of your future benefits today, when you're not around to use them?

On the other hand, a closed file is a good file for an insurance company. Sometimes, it pays for them to simply pay off a significant portion of the claim to make you go away so they can close their file.

Because there are contingencies for millions of dollars in benefits flowing from the insurance company to the accident victim, the insurance company may insist in putting that money into what's called a structured settlement.

In most cases, the accident victim will want all of his money upfront. I couldn't agree with the accident victim more. Who wants to wait over the course of many years to receive their benefits when they can have all of them today?

But sometimes this isn't possible and an insurance company will refuse to lump out the accident benefits unless they're put into a structured settlement. If you want to lump out your benefits, you will likely have to play ball and go the structured settlement route.

So, what is a structured settlement and how does it work? Let's say that your Toronto personal injury lawyer from Goldfinger Personal Injury Law has recieved a future care cost report stating that you will need $2,000,000 in accident benefits over the course of your life. The insurance company agrees with the findings of the report and agrees to pay you out that sum. Instead of recieving $2,000,000 in benefits up front in one large lump sum, that amount of money is paid out to you over time. Generally payments are made out to you on a monthly basis.

A portion of that money can be paid out up front in cash, and the remainder paid out through the structure. The amount of cash up front is subject to negotiation. Some insurance companies are very rigid on how much money is paid up front. Others aren't as rigid, but they'd still like to see a certain percentage get paid out into the structure.

From an insurance perspective, paying the money out into a structure has tax benefits which saves them money. In addition, insurance companies may also take out an insurance policy against your life to save them additional money should you pass away before all of the money in the structure is paid out. Basically, the insurance company will take out a policy, hoping that you die so they can get their money back. Pretty morbid stuff. But, these policies can also name family members of loved ones as beneficiaries should the accident victim die, so that the money doesn't go back to the insurer; but goes to those named beneficiaries instead. This is all subject to negotiation with the insurance company.

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Again, all of these options are subject to negotiation. But keep in mind that an insurance company is NEVER under any obligation to lump out your accident benefits. They can keep your accident benefit file open indefinitely until your benefits have expired due to a lapse in time, have dried up because they've all been spent; or wait until you die. A dead body can't claim attendant care benefits, income replacement benefits or medical/rehabilitative benefits.

The ultimate bargaining chip which the accident victim may have can be to refuse to bargain with the insurance company, and keep the claim open indefinitely. But if this decision is made, the accident victim has to be congisant of all of the headaches with dealing with an insurer, which can include but are not limited to: surveillance, insurance medical examinations with a team of quack insurance doctors, examinations under oath, forms to complete, not to mention all the mail and paper work you will be getting for the insurance company associated with your file. Sometimes it's best to keep the claim open. But other times, it's best to lump out the claim and move on with your life. The choice is always yours.