What Is a Lump-Sum Settlement? – Kansas City Workers Comp Attorney

Lump-sum settlements are a payment option where an injured employee receives a one-time compensation for losses incurred from a work-related injury.

As a worker, you are generally entitled to compensation for losses incurred due to work-related injuries. The benefits you receive will help meet your lost wages, medical costs, temporary total disability, and emotional distress.

While you can receive your benefits as weekly or biweekly payments over time, you may also be given the option to receive a one-off or lump-sum payment.

Lump-Sum Settlement

Lump-sum settlements, also referred to as compromise and release deals, are a compensation payment option where an injured employee receives a one-time compensation for losses incurred from a work-related injury through their employer’s insurance.

These payments are generally made under two circumstances:

• Your employer’s insurance provider wants to wash their hands of their financial obligation to you.
•  As an injured worker, you want to know the exact amount you’ll receive as compensation, and the only way to do that is by receiving a lump-sum payment.

Pros of a Lump-Sum Settlement

Typically, the advantages of accepting a lump-sum deal include:

• Money in your pocket at once instead of small installments
• Less involvement in defense medical exams
• No constant monitoring by your employer’s insurance

However, it is important to confirm with your doctor and workers comp attorney that your injuries won’t require expensive treatment in the future. You should also ascertain the amount on offer is enough to sustain you during your period off from work, including covering your out-of-pocket expenses.

Cons of a Lump-Sum Settlement

In some cases, taking lump-sum payments may not be in your best interest. These types of scenarios include:

Early Stages of Recovery

It is often impossible to know the level of medical care you’ll need right after an injury. Accepting a lump sum settlement during the initial treatment process of a work-related injury is risky as you may lose if the settlement amount isn’t enough to cover your hospital expenses long-term.

When Filing for a Social Security Disability Claim

If a work-related injury causes permanent disability, you can file a social security disability claim on top of your compensation claim. In this case, receiving a lump-sum settlement will likely significantly lower your SSD benefits to meet the worker compensation offset threshold.

If You Receive an Inadequate Offer

When the amount on offer in a lump sum settlement is not enough to cover the wages lost plus medical expenses, and out-of-pocket expenses, a lump sum settlement can be unfavorable to you.

“Will I Have to Pay Taxes on My Lump-Sum Settlement?“

Typically, workers’ compensation benefits, including a lump-sum settlement, aren’t regarded as taxable income and, therefore, can’t be taxed. 

Speak With a Kansas City Workers Compensation Attorney

Lump-sum settlement agreements aren’t straightforward as you may think. However, having an experienced workers’ compensation attorney can help you avoid settling for less than you are legally entitled to.

At the Law Office of James M. Hoffmann, we have a proven record of success representing workplace injury victims. Contact us today for a case review!