When you settle your workers' compensation claim, the insurance company may ask you if you want a lump sum settlement or a structured payment. The structured payment will pay you your benefits over time, while the lump sum settlement will be one payment of money. While receiving a large sum of money at one time may seem to be the right thing to do, there are some disadvantages you must consider. Here are a few to consider and discuss with your workers' compensation lawyer.
1. You Assume Responsibility For Your Future Medical Care
A lump sum settlement is designed to cover the medical expenses associated with your injury for the rest of your life. You may be able to have some of these expenses covered under additional medical insurance you may have. But unfortunately, other insurance companies may deny coverage for these pre-existing conditions.
Your injury or illness may have additional complications in the future. You will be unable to request extra money from the workers' compensation insurance company to cover these complications or other increasing or unanticipated medical costs.
2. It Is Easy To Overspend
When you receive a lump sum settlement, the payment allows you to have the financial security you have dreamed of. The compensation can be desirable when you have had reduced or no income.
Unfortunately, receiving such a large amount at one time can make overspending easy. Frequent small spending can quickly add up to significant amounts. A lump sum settlement requires good budgeting skills; remember that this money must last an extended time.
3. You May Lose Your Employment
Depending on your employer, the insurance company may require your resignation as part of the settlement. Forced resignation is often because the company fears you represent a future risk they are unwilling to insure. For example, if you have another injury, even on the small body part you injured before, you would be eligible to file another claim.
4. Your Settlement May Impact Your Future Pension
A lump sum settlement may impact future pension benefits you are entitled to from your employer at your retirement. Pension benefits are typically calculated based on the number of contributions you or your employer make over a specified period. The lack of contributions will affect the amount you receive in the future.
Deciding how to take your workers' compensation settlement is complicated. Make sure you research and consult your workers' compensation lawyer before making any decisions.