Structured settlements were first introduced in canada to help a child suffering from thyalidomide. And it became a trend to settle all the cases of personal injuries using structured settlements after then.
Working And Calculation of Structured Settlement
How Does A Structured Settlement Work?
When both the parties agree on a structured settlement, the defendant or his insurance company has to pay the amount decided for a structured settlement to the party affected. One should keep a watch while going for an insurance company, and only the insurance company specializing in structured settlement payments over years needs to be hired.
If by chance the insurance company declares that it got bank rupted, the structured settlement is gone !
There is always a slight risk in structured settlement.
Calculating The Amount of A Structured Settlement :-
Suppose a claimant wants to receive rupees 40 lakh per year for 10 years, from the defendant and the claimant wants that his or her heirs should be mad the nominee to that sum if he or she dies before the decided time.
Although in ten years , the claimant or his nominees receives more than rupees 40,00,000 but the defendant will have to pay much less than the desired sum settlement. That is why a structured settlement is also known as “a stream of future income”
a future income stream settlement is usually calculated in the terms of its ongoing present value. And the ongoing present value is a financial concept determining the value of the stream of the future income. If all the money is in the bank account till the date, the insurer needs to have more than 40,00,000 in the bank at present in order to pay the claimant rupees fourty lakh for the next ten years, in order to pay complainant the desired amount of structured settlement in his account today.