The lump sum settlement is the traditional method for settling a case. The defendant sends you a check, you cash the check, and the case is over. You should take a lump sum settlement for all small settlements and most medium-sized settlements (less than $150,000 or so).
But if you are settling a larger case, there are two good reasons for doing a structured settlement.
First, the structure guarantees that you won’t spend the money too fast. Sadly, many personal injury plaintiffs who receive large windfalls blow through the money in an astoundingly short time, and then, maybe two or three years later, have nothing left.
Second, the structured settlement saves you money on your taxes. While the money that you receive in a personal injury settlement is usually not taxable, you do have to pay taxes on the interest and dividends that you receive on the settlement money after you invest it. That can be a large tax payment every year. With a structured settlement, you have far less money sitting in the bank, and thus a much lower tax obligation.
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