When you’re bringing a personal injury claim, there’s a lot to think about, but one thing that’s often not on a personal injury claimant’s radar is how they will receive their settlement. Should you accept a lump sum payment from the defendant, or do you want to negotiate a structured settlement?

Ultimately, there are benefits and drawbacks to both structured settlements and lump sum payments, and with the help of an experienced personal injury lawyer, you’ll be able to make the best decision for your unique situation. In this blog post, we’ll introduce the concept of structured settlements, how they work in the context of personal injury claims, the benefits and drawbacks of structured settlements, and more.

What are Structured Settlements?

Unlike a traditional personal injury settlement, where the victim receives a lump-sum settlement, a structured settlement provides the victim with periodic payments from their settlement over time. Structured settlements are typically “structured” to meet the victim’s specific needs and can include both immediate and deferred payments.

How are Structured Settlements Used in Personal Injury Claims?

Structured settlements come into play in personal injury claims when negotiating the settlement of your claim. When a personal injury lawsuit is settled, the parties will negotiate the settlement terms and structure. Once approved, the defendant will make payments to the claimant over time in accordance with the terms of the structured settlement.

When Should Structured Settlements Be Used in Personal Injury Claims?

Theoretically, structured settlements can be used for any personal injury settlement. However, there are some situations where a structured settlement may be more beneficial for the claimant.

For example, larger settlements or circumstances where the claimant has suffered severe, long-term injuries and will have ongoing medical expenses and care costs are typically more amenable to structured settlements than, say, a comparatively small settlement amount because it ensures that the claimant will have access to funds over a long period. Furthermore, structured settlements are almost invariably used in personal injury claims for minor children.

The Benefits (and Drawbacks) of Structured Settlements

Structured settlements aren’t right for every personal injury claimant, so it’s important to consider both the benefits and drawbacks of structured settlements before opting for a structured settlement over a lump sum payment.

Some potential benefits of structured settlements include:

  • Protection from Mismanaging Funds: Some personal injury claimants, for a variety of reasons, may struggle to manage a lump-sum payment. By opting for a structured settlement, which provides periodic payments, these individuals can minimize the risk that their settlement funds will be mismanaged or squandered.
  • Stability: Structured settlements help ensure that a personal injury claimant receives a steady stream of income over time. This form of settlement can be especially helpful for claimants suffering from long-term, permanent injuries who will need to ensure they have the financial resources available to cover ongoing medical expenses and lost wages.
  • Customization: As every personal injury claimant is different, structured settlements can be customized to meet the projected needs of each unique individual. For example, payments can be structured to cover specific expenses or to be made at particular times (for example, when the claimant reaches a particular age).

Some potential drawbacks of structured settlements include:

  • Loss of Investment Opportunities: Lump sum settlements provide personal injury claimants with immediate access to their full settlement, which also provides opportunities to invest or otherwise use the funds in full that are not available to claimants who opt for structured settlements.
  • Risk of Default: Personal injury claimants seeking structured settlements should consider whether there is a risk that the defendant will not be able to pay a structured settlement over time. For example, while insurance companies are typically financially stable, there may be a higher risk of default (whether anticipated or unanticipated) down the road if a personal injury claimant accepts a structured settlement from a defendant, meaning that the claimant may not be able to fully recoup their settlement funds.
  • Limited Control over the Settlement and Funds: Personal injury claimants may face frustration with structured settlements over time. For example, if unexpected expenses arise or the claimant’s circumstances change, they may be frustrated over being unable to access their funds.

While structured settlements have benefits and drawbacks, ultimately, the claimant’s circumstances will dictate the most appropriate option.

Are Structured Settlements Taxable?

Like other forms of personal injury compensation, structured settlements are non-taxable. Remember, however, that while the settlement funds themselves are non-taxable, you may be taxed on interest or capital gains arising from your use of the funds (for example, if you choose to invest some or all of your settlement funds).

Do I Need Court Approval for a Structured Settlement?

The parties do not always need court approval for a structured settlement. Under Rule 7.08 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, however, court approval must be obtained for any settlement made by or against a person with a disability (including minors).

The Role of Structured Settlement Brokers in Personal Injury Claims

If an insurer is defending the personal injury claim, they will likely work with a structured settlement broker to design and implement the structured settlement. These professionals specialize in creating customized settlements that meet the needs of both the claimant and the insurance company.

Can I Change My Structured Settlement?

Changing the terms of a structured settlement once a personal injury claimant has entered into a settlement agreement can be challenging. However, the parties may be able to change the terms of a structured settlement through mutual agreement or with the court’s approval, depending on the claimant’s situation and how the structured settlement was created.

Conclusions on Structured Settlements

Structured settlements are a valuable tool in personal injury settlements. However, they aren’t right for everyone, and personal injury claimants should carefully consider whether they would truly benefit from this settlement. If you’re questioning whether a structured settlement is right, speaking with an experienced personal injury lawyer is best. They will be in the best position to advise you based on your unique situation and negotiate a favourable settlement when the time comes.

Experienced Ottawa Personal Injury Lawyers Serving Personal Injury Claimants

At Tierney Stauffer LLP, our team has many years of experience negotiating with insurance companies to get full and fair settlements for our clients. We will advise you of the best course of action to obtain the maximum possible settlement to help you recover financially and move on with your life.

Call us at 1-888-799-8057 or contact us online to speak with one of our experienced personal injury lawyers today.


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