How Are Personal Injury Settlements Paid Out?Personal Injuries
A personal injury claim can take a long time to settle. Once you have reached a settlement agreement, you may feel a wave of relief. You can finally get the compensation you need to pay off your ongoing expenses and move forward with your life, not to mention ending the battle for compensation for your injuries.
However, getting that compensation may prove more complicated than you initially expected. How do insurance settlements get paid out? Does the insurance company write you a check directly? Some of the details of your settlement may depend on the circumstances surrounding your accident and your injuries, so make sure you ask an attorney any questions you may have.
1. You will sign a settlement agreement.
Your settlement agreement establishes that you have accepted the amount of compensation the insurance company offers and that you will not pursue further compensation. That means you cannot seek additional compensation from the insurance company even if you discover other losses or injuries related to the accident.
The settlement alleviates further liability on the part of the insurance company for that accident and the injuries you sustained, including any potential future medical expenses that might arise from the incident.
2. The insurance company will issue a check to your attorney.
In most cases, once you have arrived at and signed a settlement agreement, the insurance company will issue a check to you and your attorney. The check will go to your attorney’s office. Often, your attorney will receive a percentage of that settlement check for the attorney’s services in pursuing your settlement.
The check goes to your attorney’s office rather than to you directly so that your attorney can place it in a legal trust while dealing with any other expenses that may relate to the settlement, including liens.
3. Your attorney will help you distribute the settlement.
Distributing the settlement offer may look more complicated than you initially expected. Many entities may have a right to some of the funds from your settlement, especially if you had considerable medical expenses or any liens placed on the account.
Most of the time, personal injury attorneys work on a contingent fee basis. That means that, instead of requiring you to pay up front for the legal services you need to manage a personal injury claim, you can pay your attorney out of a percentage of your settlement. The terms of your contract with your attorney will dictate what percentage of your settlement goes to your attorney.
Sometimes, that looks like a straight percentage, regardless of what the attorney may have needed to do to help you settle your claim. In other cases, the attorney’s percentage may increase based on the services necessary: for example, you might pay more if you had to go to court to settle your claim than if you reached a quick settlement agreement out of court.
Your attorney’s percentage will often come out before any other fees associated with your claim.
Any Liens on the Settlement
You may have had a lot of medical bills that went along with your injuries immediately after the accident. Sometimes, you may manage those medical bills relatively effectively while waiting for payment through your personal injury claim. In other cases, however, you may have needed to let a medical care provider know that you had to wait on a settlement before issuing payment.
The medical care provider may, in turn, have issued a lien against the settlement. A lien, in essence, establishes the care provider’s right to the funds from your personal injury claim that directly relate to your medical bills.
That does not necessarily mean that a medical care provider will immediately take the full funds from your personal injury claim, even if the claim did not fully cover the expense related to your medical bills. In some cases, your attorney can negotiate with medical providers to lower the rate you have to pay, especially if you have multiple bills or the claim does not fully cover the extent of your medical bills. Talk to your attorney about any liens on the account, as well as whether you may negotiate lower costs on your bills.
Your medical insurance provider may also issue a lien on your settlement in some cases. Sometimes, depending on state laws and how your accident occurred, your medical insurance provider may have the right to claim some of the funds spent on your medical costs from your settlement.
Talk to your lawyer about whether your insurance provider might have the right to claim any of the funds related to your personal injury claim and how to negotiate the fees you may owe your insurance provider. If you have government health insurance, the government may have the right to the funds from your personal injury claim, based on the cost of medical treatment paid for by that program.
Talk to your attorney about injuries like traumatic brain injury or spinal cord injury that may require ongoing medical treatments and how you should manage future interactions with your insurance company.
Expect it to take time to negotiate any liens on your settlement. Your attorney may need to go back and forth with the lien-holders several times before arriving at a fair agreement. That negotiation may mean that it takes longer to get your settlement funds in your hands, but it may also help decrease your ultimate financial responsibility related to the accident, leaving you with more of the funds from your settlement.
Once everyone who has a claim to the funds from your personal injury claim has received their payment, and you have finalized any legal fees related to your claim, your attorney will release the funds remaining. You may receive a paper check or an online transfer of funds, depending on your personal preference and how you finish out the paperwork for your claim. Once you have received that check, you will end your personal injury claim once and for all, and you can spend the settlement funds as you see fit.
Lump Settlements vs. Payment Plans
Often, you may have two options when you get a settlement related to an accident. After many accidents, including most car accidents, you will receive a lump settlement: a one-time settlement that you can then use to take care of your immediate expenses. Most of the time, insurance companies will also pay out lump-sum payments.
In some cases, however, your settlement agreement may not include a lump sum payment. Instead, you may receive a settlement offer that consists of a payment plan: instead of a one-time settlement, you will continue to receive payments (often monthly) over a specified time. A payment plan helps spread out the financial challenges the liable party faces.
When you need a settlement from a company or private individual, payment plans can make it possible for you to get the full compensation you deserve for injuries and losses sustained in the accident, even when the liable party may not have those funds upfront.
Are There Advantages to Lump Settlements or Structured Settlements?
In some cases, you may find that receiving a structured settlement offers several key advantages. In the aftermath of a severe accident, you may find yourself dealing with ongoing medical expenses or rebuilding your life because of the full extent of your injuries. As a result, you may find that a structured settlement offers ongoing assistance with those bills and provides you with a regular source of income.
On the other hand, when you receive a lump-sum payment, you will have the full funds from your personal injury settlement in your hands immediately, rather than having to wait for months or even years for the full amount to pay out. When you have significant immediate expenses and needs, including high medical costs or the need to renovate your home to accommodate your injuries, you may find that a lump sum settlement works best for your financial needs.
Talk to your attorney about your financial needs and the strategies available to you. In many cases, you may find that a financial advisor can help you break down how you should manage your compensation, what strategy works best for you, and even how to invest it to provide an ongoing source of income.
Can Medical Care Providers and Medical Insurance Companies Take Funds Reserved for Pain and Suffering?
As you worked with your attorney to put together your claim, you likely categorized your expenses. You saw X in medical bills, Y in lost wages, and asked for Z in compensation for pain and suffering related to the accident.
However, the final settlement check from the insurance company does not break down that way. Assuming that you receive a lump sum payment for your settlement, you will receive a one-time check for the full amount you agreed to accept. You must then take care of paying the parties that have some entitlement to a percentage of that claim, regardless of whether those funds strictly fall under the heading of “medical bills” or “pain and suffering.” Furthermore, the final settlement offer may not even break down that compensation by the type of damage, but may instead provide you with a full settlement amount.
While your lawyer may take care of paying any liens on the funds from your settlement, including negotiating with those parties to reduce your bills where possible, you will need to make arrangements to pay any other outstanding or future medical bills. The funds from your settlement may make it easier to pay your medical costs.
How Can a Lawyer Help Increase Your Settlement?
Working with an attorney can help increase the compensation you can recover in several critical ways. First and foremost, an attorney can help make sure you understand the compensation you really deserve as part of your personal injury claim. Often, that means breaking down the financial losses you may have faced, including any potential liens on the settlement amount.
Next, a lawyer can help negotiate on your behalf. That means negotiating with the insurance company or the liable party to increase the compensation you can recover as much as possible. It may also mean that the attorney negotiates with your medical care providers and your insurance company to decrease what those parties claim out of your settlement.
Ultimately, your attorney wants to help you keep as much of the funds from your claim as possible. Many attorneys will not accept a case unless they feel they can help their clients come out better financially than they would have if they handled their claims on their own—whether that means increasing the settlement amount or decreasing the client’s financial liability to medical care providers and other entities after the accident.
Contact a Lawyer to Discuss Your Claim
If you suffered injuries due to another party’s negligence, you might have grounds for a personal injury claim. Trying to handle that claim on your own can leave you scrambling to determine how much compensation you deserve to keep and what steps you should take. On the other hand, an attorney can help guide you through that process and negotiate on your behalf so that you can keep as much of your settlement as possible—even once you pay your legal fees.
Contact an attorney as soon after your accident as possible to learn more about your rights, from your right to compensation to what happens with your settlement once the insurance company issues it.
Nathan Hughey, an attorney and fourth-generation South Carolinian, founded Hughey Law Firm in 2007. Before that, he spent five years defending nursing homes and insurance companies. Leveraging his experience, he now advocates for those injured or wronged by such entities, securing over $220 million in verdicts and settlements.