A common concern that arises in the context of workers’ compensation cases is whether it is better to seek weekly compensation payments or to accept a lump sum settlement. Both of these have their pros and cons, and some people may not realize that there can be a third option as well. It is vital that you have all the facts before you try to make this kind of major decision that can affect your financial security and your future.
What is a Lump Sum Payment?
A lump sum payment (also referred to as a compromise and release), is available to injured workers who have been off work for at least four months and are currently receiving workers’ compensation. A lump sum payment is a one-time settlement from the insurance company. It is intended to replace your medical bills, your weekly workers’ compensation checks, or both. Keep in mind, that a lump sum settlement can exceed your weekly workers’ compensation benefits multiplied by 500 weeks (i.e., less than 10 years worth of workers’ compensation benefits). Lump sum settlements must be approved by a workers’ compensation judge, and once you have accepted a lump sum payment, you will likely be barred from going back to the insurance company to request more money. But you may not be offered a settlement by the insurance company in the first place, in which case the question of a lump sum payment would not apply.
Pros and Cons of Lump Sum Payments for Workers’ Comp
This is important: once you have accepted a lump sum payment for workers’ compensation, you may not be entitled to any more money. That is likely all that you will receive for your injury. There are advantages to accepting a lump sum payment, however. You will no longer have to worry about medical exams required by the defense, nor do you need to worry about the insurance company attempting to discontinue your benefits while you are still recovering. And some people prefer accepting a one-time payment rather than weekly payments.
There are, of course, major downsides depending on your situation. If you develop unforeseen complications from your injury, you may not be able to seek additional compensation. And if the medical expenses end up being more than the settlement accounted for, you will often be responsible for paying them if your personal health insurance does not cover them.
Considerations for Accepting a Lump Sum Payment
Here are some things that you must consider before you accept a lump sum payment:
- Is the proposed settlement fair? If the answer is no, then you do not want to accept that lump sum settlement.
- Will the settlement provide you with the financial security that you and your family really need?
- Are your injuries likely to get worse over time? If they are, then the lump sum may not cover the additional medical costs that your injury may incur later on.
- Have you stopped making progress in your recovery? Does your doctor believe that you will not recover any further?
These are just a few of the items you need to consider when deciding whether to accept a lump sum settlement.
Weekly Workers’ Compensation Payments
If you do not accept a lump sum settlement, you will receive weekly payments and still retain the right to pursue future compensation and benefits in connection with the injury. Remember — if you accept a settlement, that is typically your final payment because you sign away your right to pursue future compensation and benefits for that injury.
Structured Payments: Another Alternative
Another alternative is referred to as structured payments, also known as structured annuities. This is essentially a lump sum settlement paid out over time. It is not the same as receiving weekly workers’ compensation payments. With structured payments, the insurance company will pay the entire settlement up front, but the money is used to purchase a structured payment system. The settlement amount then becomes guaranteed payments for the rest of your life. These payments are made at predetermined intervals. Because the amount is not paid to you in a single lump sum, you do not have to worry about the temptation to spend it all at once in an unwise manner rather than on your medical expenses. You also get a better return on your money because the lump sum is invested by the financial company that purchases it from you. You then receive as part of your regular payments the returns on that lump sum.
When seeking workers’ compensation for a work-related injury, the insurance company may offer to settle with you out of court. You then have to make a decision: accept the lump sum payment you are offered and forfeit the right to seek further compensation for that injury in the future, or keep pursuing weekly payments. There are pros and cons to both of these options, and which option is the best for you may depend heavily on the type and severity of the injury you have experienced. If you do opt for a lump sum settlement, you can also have that settlement distributed into structured payments. Whatever choice you make, it is best to have the advice of an experienced workers’ compensation attorney.
Contact Hillsberg Law
If you or someone you love has been injured on the job, you do not have to fight against your employer’s insurance company alone. My name is Geoffrey Hillsberg, and I specialize in workers’ compensation claims. Since 1995, I have made the changing landscape of workers’ compensation law in the state of Pennsylvania my focus and I want to help you receive the compensation you deserve under the law. Contact Hillsberg Law todayto discuss which workers’ compensation settlement plan may be right for you.