After you agree on a settlement or win a judgment the insurance company must pay you within a certain time frame. Once that payment window closes, the insurance company will be on the hook for serious interest (18% in most states) on the entire amount due to you. The payout window in most states are no more than 30-days.
CONGRATULATIONS! YOU’VE WON THE LAWSUIT. NOW WHAT?
Prompt Payment Statutes in Texas generally require the other side’s insurance company to pay you within 5-business days after the insurer accepts the demand for payment. In certain cases, insurance companies can delay payments by 45-days or more by arguing that the insured did not provide proper notice or that they need additional information to release the funds. Your attorney should help you avoid these delays by ensuring the other side’s insurance company has everything they need from the start of the lawsuit.
Prior to payout, your opponent’s insurance company will require you to sign a Release Form that prevents you from seeking more money from them in the future. These forms are mandatory for payment, and can cause delays when issues arise regarding the wording or other aspects of the release. Your attorney should demand “expeditious release” as part of the settlement agreement, meaning the insurance company cannot delay payment after the settlement by taking additional time to argue about release terms.
The settlement check is then sent to your attorney who deposits it in a trust account while the check clears. This can take up to two weeks or more due to the large amounts usually involved with such payments. Your attorney will then deduct any agreed upon lawyer’s fees (usually 33.3%) and send you a check for the remaining amount. This check can take another two weeks to clear at your bank before the money becomes available in your account.
TIPS FOR MAXIMIZING YOUR SETTLEMENT CHECK: SAVING, INVESTING AND SPENDING
Settlement awards come in all shapes and sizes, but typically people are not used to receiving such a large amount of money at once. Often successful plaintiffs believe they’ve “hit the jackpot” when in reality settlement money should be carefully split up into a few different pots.
Saving – Portions of a settlement amount may be taxable or required to pay for medical and other expenses. Make sure you know what needs to be saved to cover these amounts.
Investing – Money loses value over time due to inflation (estimated around 2 to 4%) meaning $100 today will only be worth around $85 in 10-years. Put some of your settlement money into investments like stocks, real estate or bonds to preserve the value of your money for the future.
Spending – I know it’s hard, but resisting the temptation to “live-it-up” now that you’ve got the settlement money pays off in the long-run. Try delaying any major purchases for at least 30-days after receiving the check, and if you still think you need it that bad, talk to someone sensible that you trust to see what they think (clients can call me with these kinds of questions anytime!).
With some planning, good decisions and guidance you can make that money work for you. There is nothing worse than winning a big sum and then finding yourself in deeper debt because of bad choices.
