When someone wins a personal injury settlement in Alberta, they often assume they’ll receive one large payout. However, settlements can be distributed in two different ways: through structured settlements or lump sum payments. At Grover Law Firm, our experienced personal injury lawyers help injury victims understand these payment options so they can make informed decisions that best support their recovery and long-term financial security.
What Is a Lump Sum Payment?
A lump sum payment is exactly what it sounds like—a one-time payout of the total settlement amount. After a settlement is finalized, the insurance company pays the full value directly to the injured party or their lawyer, minus any agreed-upon legal fees.
Common Benefits of a Lump Sum
Receiving a lump sum can be beneficial for people who need immediate access to funds. It allows victims to:
- Pay off medical expenses, rehabilitation costs, or lost wages right away
- Invest the money independently
- Handle major financial obligations, like mortgages or debt repayment
The main appeal is control. You can choose how and when to use your compensation. However, with that freedom comes responsibility.
The Risks of Lump Sum Payments
A one-time settlement payout can be tempting, but it may not always be the safest option. Once you receive the total amount, it’s up to you to budget carefully. For many accident victims, the money must cover future expenses, such as ongoing medical care, physical therapy, or long-term home modifications.
Without proper financial planning, lump sum recipients risk running out of funds too soon—especially if their injuries lead to reduced earning capacity or new complications down the line.
What Is a Structured Settlement?
A structured settlement provides regular, tax-free payments over time, instead of a single lump sum. This arrangement is usually set up through a life insurance company, which issues structured settlement annuities that guarantee consistent payments for a defined period of time—or even for life.
How Structured Payments Work
Once both parties agree to the settlement, a portion of the total amount is used to purchase an annuity from a life insurance provider. That annuity then pays the injured person at regular intervals—monthly, annually, or according to a customized payment schedule.
Structured settlements are common in cases involving:
- Severe injuries or permanent disabilities
- Wrongful death claims, where the family relies on consistent income
- Long-term medical expenses or rehabilitation costs
Advantages of Structured Settlements
Structured settlements are designed to provide financial stability and protect injury victims from future hardship. Some key advantages include:
1. Long-Term Financial Security
Since payments are distributed over time, structured settlements ensure a steady income that cannot be spent too quickly. This arrangement offers peace of mind—especially for individuals with long-term medical needs.
2. Tax-Free Payments
In Canada, structured settlement payments are tax-free, meaning recipients keep the full value of each payment without worrying about additional deductions.
3. Protection from Creditors
Funds from structured settlements are generally protected from creditors, helping ensure your compensation goes directly toward your recovery, not outstanding debts.
4. Flexible Design Options
The payment schedule can be tailored to fit your life. For instance, payments can increase annually to offset inflation, or larger lump payments can be scheduled at specific times—for example, when a child reaches adulthood or to cover future medical expenses.
Drawbacks of Structured Settlements
While structured payments offer long-term benefits, they aren’t ideal for everyone.
- Limited access to funds: Once the payment plan is finalized, it cannot be changed or cashed out early.
- Less investment control: Recipients cannot invest the settlement independently.
- Dependence on insurer stability: Payments rely on the solvency of the life insurance company managing the annuity.
For those who prefer flexibility and have solid financial discipline, a lump sum may be more practical.
Comparing Structured Settlements vs. Lump Sums
| Feature | Structured Settlement | Lump Sum Payment |
| Payment Style | Regular, ongoing payments | One-time full payout |
| Tax Treatment | Tax-free | Tax-free (in most personal injury cases) |
| Financial Control | Limited | Full control |
| Budgeting Risk | Low | High |
| Protection from Creditors | Strong | Moderate |
| Ideal For | Long-term care needs | Immediate expenses or investments |
The best choice depends on your medical condition, financial goals, and the size of your settlement. Many Alberta injury victims choose a hybrid approach—taking part of the compensation as a lump sum for short-term needs, and structuring the rest for long-term stability.
Alberta Law and Structured Settlements
In Alberta, personal injury settlements are typically negotiated outside of court. Once an agreement is reached, either form of payment can be arranged under provincial law.
Structured settlements are governed under the Income Tax Act and are commonly used in cases involving motor vehicle accidents, medical malpractice, or catastrophic injuries. Since payments are non-commutable and non-transferable, they cannot be sold or altered once established—ensuring consistent financial support.
If you’ve suffered serious injuries and are considering your payment options, it’s crucial to consult a Calgary personal injury lawyer familiar with Alberta’s compensation system. Your lawyer can help you understand whether a lump sum or structured settlement aligns better with your situation.
When to Consider a Structured Settlement
You might benefit from a structured settlement if you:
- Require ongoing medical treatment or rehabilitation
- Have dependents relying on your income
- Are concerned about long-term financial management
- Want predictable, tax-free income over time
Conversely, if your injury is less severe, and you need quick access to cash to rebuild your life, a lump sum payment may be more beneficial.
How Grover Law Firm Can Help
At Grover Law Firm, we’ve helped countless Albertans navigate the personal injury claim process—from filing initial claims to managing complex settlement negotiations. We understand that financial recovery is just as important as physical healing.
Our team will:
- Review the terms of your settlement
- Explain all payment structures in detail
- Connect you with financial experts for long-term planning
- Ensure you receive fair compensation that supports your future
Choosing the Right Settlement Option
The decision between a structured settlement and a lump sum payment isn’t one-size-fits-all. Every injury victim’s circumstances are unique. Consider:
- Medical outlook – Will you need continued care?
- Financial discipline – Can you manage a large sum responsibly?
- Family responsibilities – Do you have dependents?
- Age and employment – How will this impact your long-term financial security?
Our Calgary personal injury lawyers can help evaluate your case and recommend the approach that best protects your interests under Alberta law.
Protect Your Financial Future with Grover Law Firm
If you’ve recently received a personal injury settlement in Alberta, understanding your payment options can make a huge difference in your recovery. Whether you’re considering a structured settlement or a lump sum payment, Grover Law Firm is here to guide you through the process and ensure you make the best choice for your situation.
Call Grover Law Firm today at (403) 253 1029 for a free consultation. Our experienced personal injury lawyers are ready to help you secure the compensation—and peace of mind—you deserve.