Los Angeles Claims Adjuster Property and Causality Practice Exam

What characterizes a structured settlement?

1. A single upfront payment

2. Payments in installments over time

3. Immediate full payment of the claim

4. A payment only for medical expenses

The correct answer is: Payments in installments over time

A structured settlement is characterized by payments in installments over time. This approach is designed to provide the claimant with a reliable stream of income instead of a lump sum payment. It often arises following personal injury claims, where long-term financial support is crucial for ongoing medical care or living expenses. The benefit of this arrangement is that it helps to protect the claimant from the risks associated with spending a large sum of money all at once, which can lead to financial mismanagement or depletion of funds. Structured settlements can be tailored to the individual's needs, with payments planned for specific intervals, which may include a combination of immediate payments and deferred payments in the future. Options such as a single upfront payment or immediate full payment of the claim do not align with the concept of a structured settlement, which specifically involves scheduled payments over time. Additionally, a payment only for medical expenses does not encompass the broader financial needs that structured settlements are designed to address, making the idea of installment payments the defining characteristic.