Workers’ compensation settlements take one of two forms: lump sum settlements and structured settlements.
In this post, we explore structured settlements, including their defining characteristics and how they compare to full and final settlement payouts.
Matt Fendon Law Group represents workers’ compensation claims in Arizona and can help you get the settlement you deserve.
If you need help with your workers’ compensation settlement, please call us at (800) 229-3880 to speak with one of our Arizona workers’ compensation law specialists.
What is a Structured Settlement?
A structured settlement is a negotiated settlement that pays your workers’ compensation payout over time in periodic payments. Your total settlement purchases an annuity, often from a life insurance company, from which the periodic payments are made.
Characteristics of Structured Settlements
The main characteristics of structured settlements include:
- Settlement payment amounts can be customized. For example, you could opt for a lump sum or larger payments up front to cover immediate expenses, and smaller monthly payments later for ongoing support needs.
- Structured settlements can provide long-term financial security and a steady income stream of reliable, long-term payments.
- Structured settlement payments and lump sum payments are generally exempt from tax implications under federal law.
- You can reduce the risk of bad financial choices because not all your settlement money is potentially at risk at any one time.
- Structured settlements are compatible if you are receiving government benefits like Medicaid or Supplemental Security Income, which are often income-based.
Disadvantages of Structured Settlements
Compared to lump sum payments, structured settlements can present you with some unique disadvantages. These include:
- Under a payment schedule system, you do not immediately have access to the entire amount of your settlement funds.
- Your ability to cover unexpected expenses can be limited by what structured settlements provide monthly.
- Although state guaranty associations back annuities, if the company managing your structured settlement annuity lacks financial stability and fails, it could impact the availability of your future unpaid payments.
Structured Settlements Versus Full-and-Final Settlements
Most workers’ compensation settlements are lump-sum, full-and-final payments because they are simpler and faster to resolve than structured payments.
Arizona workers’ compensation law only began allowing full-and-final lump sum settlements in late 2017. To be valid, these payment arrangements are subject to stringent validity requirements set forth by the Industrial Commission of Arizona. Additionally, the legal structure of your full and final settlement must be approved in advance by an administrative law judge.
Characteristics of Full-and-Final Payments
Some advantages of using the full-and-final option in a workers’ comp settlement include:
- You receive your entire settlement upfront, giving you full control to spend, save, or invest your funds from the start, without the restrictions of a structured settlement.
- With immediate access to your funds, you can cover urgent or unexpected expenses that are difficult to manage with structured payments.
Arizona’s full-and-final settlement law mandates that lump-sum agreements detail and explain all anticipated future medical costs and treatments.
What Goes Into a Settlement Calculation?
Workers’ compensation settlements are based on what you negotiate with the insurance adjuster for your employer’s workers’ compensation insurance company.
Your workers’ compensation attorney can help you secure maximum compensation based on your personal circumstances, including the following considerations:
- Your average monthly wage before your injury.
- The nature, type, extent, and duration of your injuries.
- Whether you can fully recover from your injuries, or when you reach maximum medical improvement.
- Whether your injury is a scheduled or unscheduled one under Arizona workers’ compensation law.
- The cost of your past and future medical treatment.
- The impact of any pre-existing conditions you may have had before your work injury.
- Whether you will need long-term care, like rehabilitation or vocational training.
Do You Need Help With Negotiating a Workers’ Comp Settlement Under Arizona Law?
Matt Fendon Law Group specializes in helping injured workers recover the full value of their temporary and permanent workers’ comp claims under Arizona’s workers’ compensation laws.
In fact, Matt Fendon Law Group negotiated the current highest worker’s compensation settlement in Arizona history.
Our founding attorney, Matt Fendon, is a board-certified specialist in workers’ compensation law by the State Bar of Arizona.
If you are considering a settlement of your work injury claim, consult with our experienced legal professionals first. We can help you understand your options and make the best decision for your unique financial situation.
Call us at (800) 229-3880 or use our contact form to schedule a free consultation with an experienced Arizona workers’ compensation lawyer.
