Settling a personal injury case is a relief for victims. It can be a long road to reach this point, and you want to know how you will ultimately receive the money for your damages and losses. Settlement payouts are not as simple as sending or receiving a check. There is a process that precedes and follows a settlement offer and acceptance to get the money to you as quickly as possible.
First, Reach an Agreement
The first step in getting closer to the settlement payout process is reaching an agreement with the insurance company or opposing party responsible for your damages. Negotiations are not instantaneous, and it is unlikely that an insurer’s first offer will be the one you accept. Insurance companies will more than likely test the waters with an initial settlement offer that is far below your damages and losses from your injuries.
Negotiating takes some back and forth to reach an acceptable settlement. An attorney will manage communications regarding settlements and can advise you about the fairness of the offer. Each time your lawyer receives an offer, you must discuss it.
Once You Agree, Your Attorney Will Accept
After you receive a reasonable settlement offer and you would like to accept the offer, you and your attorney will discuss the terms of acceptance. If you have any questions regarding the offer or are unsure of the details, discuss with your lawyer and get answers to your questions before moving forward with your acceptance.
Do not accept an offer unless you are truly comfortable with it. Rescinding an acceptance is not an option, as this can only occur in limited circumstances, usually involving malice or fraud by the opposing party. Once you accept an offer, you enter into a binding agreement with the insurance company or responsible parties. You accept the amount of compensation and agree not to pursue further action following the settlement.
Will Your Compensation Come in a Lump Sum or Periodic Payment?
A part of the compensation in a personal injury settlement that often goes unaddressed is the payment structure. Many victims expect their payment will come in the form of a lump sum. While this is common, you must ensure that you know how you will receive the compensation before formally accepting the offer.
Another option for the payout of a settlement is a structured settlement. A structured settlement does not pay out the entire amount of your compensation at once. Instead, you receive periodic payments based on the settlement agreement terms. In many cases, defendants make monthly payments.
The victim receiving the compensation can often choose which option they prefer for their compensation payment. Your attorney may negotiate these payment options on your behalf to ensure you receive the payment structure optimal for you and your circumstances.
The Pros and Cons of Lump Sum versus Structured Settlement
Settlement payment structures offer benefits and drawbacks depending on a victim’s financial situation. You must weigh these against your circumstances to decide which option is best for you.
You will receive all of your compensation in a single payment. A lump sum allows you to take control of the entirety of your money from the moment the insurer or at-fault party pays. You can then use your money how you see fit, including paying off medical bills and other expenses accrued.
The drawback to taking a lump sum is that you must manage your money carefully because that is all you will receive. In cases where an injury can require lifelong expenses and care, you must account for and manage this compensation to last for the remainder of your life.
In a structured settlement, you will get your money typically in monthly payments. While this payment plan does not allow you to make any large purchases or investments upfront, you have the peace of mind of continued payments for the foreseeable future.
How Does Your Lawyer Receive Their Fee for Their Services?
Personal injury lawyers typically work on a contingency fee. A contingency means that their service fee is only collected if you receive a settlement. In this form, you pay your lawyer once your claim has been successful. Fortunately, you do not need to worry about writing your attorney a check or setting aside the funds for their compensation. As part of a contingency fee agreement, you will agree to the amount and method your lawyer will get paid when you first hire the lawyer.
Once you have officially accepted a settlement offer, the lawyer will submit that acceptance to the opposing parties and begin the payment transaction. The defendant or insurer will send the compensation to your attorney’s office, where it will be put in an account until you are prepared to pay for the lawyer’s services.
Your attorney will submit a bill that outlines your costs for their legal services. The bill will follow the contingency fee agreement you established at the outset of your attorney/client relationship. The lawyer’s fee is then set aside from the total compensation payout, and you receive the remainder.
What About Medical Bills or Other Accident Debts?
One other matter that your attorney will deal with before you receive your compensation is to address outstanding bills or liens from your injuries. Liens on a settlement are typical when there are medical debts for the care of your injuries or mechanics liens for vehicle repairs from an accident. Your attorney can settle these debts with your settlement and, in some cases, may be able to negotiate with parties to lower your costs.
Once your lawyer deducts their fee and other liens from the total compensation, you receive a check or deposit for the remainder, depending on the lawyer’s preferences. Once you receive your money, you may manage and spend it as you wish-but consult a financial adviser to help you manage your settlement funds in the most beneficial way.
Is Your Settlement Taxable?
Tax laws are complex, so always consult an experienced tax professional when you have tax questions.
The IRS does not tax most personal injury settlements. Some uncommon scenarios could affect your tax liability for a settlement or a portion of it. For example, if you receive punitive damages (to punish the wrongdoer), the IRS may tax that portion of your compensation.
What if You Think You Need More Money After You Accept a Settlement?
As a victim of a personal injury case, if you accept a settlement, you will likely be unable to seek any additional compensation. Once you officially accept an offer and communicate that acceptance to the opposing party, you are bound by the terms of the settlement agreement.
If you realize that the money will not cover your damages or future needs, nothing further can be done. You must seek the advice of a personal injury lawyer before you accept an offer from an insurance company or other party at-fault to ensure you receive a fair offer.
Insurance companies will try to pressure you to accept an offer early, trying to convince you that you don’t deserve anything more. However, with the help of a personal injury lawyer, you may be able to reach a settlement that aligns as closely as possible to the extent of your losses and damages. Insurers do not want to pay out all of your losses.
They want to pay out as little as possible, meaning they will offer you a settlement that is a fraction of the potential value of your claim. Ensuring that a settlement offer is reasonable in light of your current and future damages can protect you from losing out on the compensation you deserve.
How to Make Sure a Settlement Is Reasonable
A personal injury lawyer can help prevent you from losing out on compensation. Personal injury victims that go it alone are at a disadvantage and are not likely to reach the same outcome as an experienced personal injury lawyer.
When you hire an attorney to represent you in an insurance claim, you will benefit from knowing how much your case is worth. Knowing the value of your case helps you make an informed decision when negotiating a settlement and deciding whether an offer is acceptable.
When considering settlement offers, you must assess the amount offered for each category of loss you have experienced. This will help you understand the opposing party’s valuation of your losses. You can then push to seek additional compensation and pursue a lawsuit if the opposing party is unwilling to settle.
Costs and losses to evaluate when calculating damages for a settlement:
- Medical expenses - Does the settlement include all of your outstanding medical bills, reimbursement for costs already paid, and the cost of future long-term medical care?
- Lost Income - Are you receiving compensation for your lost wages due to the accident and the recovery of your injuries? Are you receiving compensation for the losses in salary if you sustain injuries that require you to reduce hours or leave your job?
- Pain and suffering - Does the offer account for the pain and suffering you have endured, including physical, emotional, and mental anguish after the accident?
- Property damage - If you sustain property loss or damage because of your personal injury accident, has the opposing party offered compensation to repair or replace this property in your settlement?
Contact a personal injury lawyer to understand your rights before accepting any settlement offer. A lawyer can help you understand the value of your claim and seek the maximum compensation that you deserve.