Learn the differences between a lump sum and a structured settlement payment for a South Carolina workers’ compensation benefits claim
Getting hurt on the job presents difficulties beyond mere physical pain. In addition to needing medical treatment, you might face additional financial pressures. If you’re unable to work during your recovery, or if you can’t return to the same role you had before the injury, you’ll need to recover not just the costs for your treatment but also replace your lost wages.
Workers’ compensation is a program that provides benefits to an employee who becomes ill or injured at work or while performing tasks related to their job. Each state has its own set of laws and requirements for who is eligible for workers’ compensation insurance and what benefits are available.
Generally, once your claim for workers’ compensation benefits is approved, you are offered the choice of a lump sum payment or a structured settlement.
A lump sum is a single payment that you receive that would cover all of the eligible costs. It’s your responsibility to budget your funds for as long as you need them. Once you receive your lump sum payment, your claim is closed, and you can’t request more money if you realize there are additional expenses. Any future costs related to the injury would be paid out of pocket.
A structured settlement is more like a payment plan. The total compensation would be delivered to you on a set schedule for a specific period of time. For example, you might receive a weekly payment of a fixed amount of money for a period of 52 weeks.
If you’re not sure which method of payment would be best for your needs and to cover your expenses, it’s best to seek the advice of a South Carolina workers’ compensation lawyer.
Negotiating with your workers’ compensation insurance benefit provider
It’s not uncommon to engage in some negotiation with the insurance provider before your workers’ compensation benefits are approved. After all, the insurance company wants to pay out the least amount possible to settle your claim, but you want to receive the greatest amount of benefits to which you’re entitled.
However, it’s important to know that once you agree to a settlement—whether structured payments or a lump sum—you can’t go back and re-negotiate for more if you have additional expenses you hadn’t anticipated.
Once you reach a settlement agreement, your employer bears no additional responsibility for your injuries. Workers’ compensation is an exclusive remedy, which means that when you make a workers’ compensation claim, you’re not permitted to file a personal injury lawsuit against your employer for that injury. Workers’ compensation benefits cover medical treatment and lost wages, but they do not include non-economic damages like pain and suffering, loss of consortium and similar.
If your injury will be long-lasting and leave you with ongoing or permanent disabilities, or if you could require future surgeries or other treatments, you need to make sure that the amount you negotiate with the insurance company will include future costs, as well as present expenses.
Lump sum settlements
In South Carolina, you can receive a lump sum payment after receiving 6 consecutive weekly workers’ compensation payments. Either you or your employer can request a lump sum payment to prevent undue hardship. The claimant, whether it is you or your employer, must present facts to justify settling the claim with a lump sum payment.
The South Carolina workers’ compensation system permits an injured worker to receive 6 consecutive weekly payments with a lump sum of the remainder.
Pros and cons of a lump sum payment
A lump sum provides you with immediate funds to pay past due and current bills while you’re not working or earning an income. These payments are not taxable, but if you invest the money from a lump sum, you would be responsible for income taxes on interest, dividends, or capital gains.
A lump sum payment also means you might not need additional medical exams or insurance company scrutiny if additional settlement amounts are denied. Again, once you’ve negotiated a lump sum and accepted a settlement offer, there is no method for receiving additional funds if there are any unexpected costs later.
A structured settlement (also called an “annuity”) would guarantee that you will receive payments at specific intervals for a period of time. Some settlement structures are designed for a period of months or years, and some are set up to continue for the remainder of your lifetime.
Your employer pays a third-party annuity provider for the full amount of the settlement, and your payments will be from that provider. Sometimes, this makes the process more streamlined. If you have any issues with the payments, you would deal directly with the provider of the annuity and not with your employer.
Pros and cons of structured settlements
For someone who thrives on having a set budget, a structured settlement can be beneficial. There’s no temptation to spend money on the “wrong” things (like taking a vacation) instead of using it to replace your lost income.
An annuity also sometimes pays out more over time than you would receive in a lump sum payment, which means you won’t have to worry about your living expenses in the future because you know that you have a set amount of money that will arrive on schedule for the term of the settlement.
However, if you have outstanding medical bills that require immediate payment, a structured settlement won’t cover those expenses. You would still need to pay those costs out of pocket, and the structured settlement payments will arrive on their own schedule.
Like a lump sum, once you agree to a settlement amount, you can’t re-negotiate for additional funds.
Schedule a consultation with a South Carolina workers’ comp lawyer
If you suffered an injury while at work and have questions about your workers’ compensation rights in South Carolina, it’s vital that you speak with an experienced workers’ compensation lawyer. The team at Chappell, Smith & Arden, P.A. is experienced and knowledgeable about workers’ compensation claims, South Carolina laws and regulations, and how to advise clients to receive workers’ comp insurance in the most beneficial manner for their specific circumstances. Contact us for your free consultation today.