If you end up being offered money damages as a result of an accident, you may have a choice to make. You may be entitled to a lump sum settlement payment from the at-fault driver's insurance company, but you might also have the option of agreeing to a structured settlement. Read on to find out more about what's good about a structured settlement and what to watch out for.

Lump Sum vs. Structured Settlement

Money of any type is typically welcome after an accident. Even if your medical expenses are paid, you probably need to account for any work that was missed and other accident-related issues. Getting the funds all at once can sound tempting, particularly if you have some major catching up to do when it comes to your budget. Unfortunately, money that suddenly appears has a tendency to disappear the same way. It can be a challenge to make the funds last. Fortunately, you might be able to have both ready cash and regular payments. A hybrid plan provides accident victims with a certain percentage of the settlement up front in a lump sum, while the rest is provided in regular payments.

When a Structured Settlement Might Not Be a Good Idea

1. Inflation strikes – Since a structured settlement is meant to be a plan for long-term payment, it can be difficult to predict your future needs and how much can be purchased with the funds. Money that seemed more-than-adequate at the time might seem a pittance in 20 years. If you are counting on the money for retirement or for a big purchase (like a home or a new car), it might be better to buy using today's prices and take the entire settlement in a single payment.

2. You might need to show more income – If you expect your structured payments to be accepted as income for a future purchase, like an auto loan, you might be unpleasantly surprised. Some lenders won't use settlement money as proof of income for loans. To buy a car, you might need to save up the funds or take the lump sum settlement, unless you have other income sources.

When a Structured Settlement is a Good Idea

1. Built-in discipline – You will not be as likely to spend the money all at once and make the settlement last longer if it's paid out over time. This form of payment provides security for your future needs.

2. It may be easier to get what you want – Insurance companies are more comfortable with this form of payment since they have more time to pay out on a loss. That could mean getting a higher settlement offer than you would have if you insisted on having it all at once.

To find out more about structured settlements, speak to a law firm like Gilbert, Blaszcyk & Milburn LLP.