Lump Sum Settlement
A single, one-time payment of the full settlement amount.
Pros: Immediate access to all funds, investment flexibility, control over spending, ability to pay off debts and medical liens immediately.
Cons: Risk of spending too quickly, large tax-free amount may affect government benefits eligibility, no guaranteed income stream.
Structured Settlement
Settlement paid in installments over time, typically through an annuity.
Pros: Guaranteed income stream, tax-free payments, protection from overspending, can be tailored to future needs (e.g., lump sums at specific ages).
Cons: Less flexibility, annuity fees, inability to access funds for emergencies without selling at a discount.