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What is a lump sum agreement?

On Behalf of | May 27, 2022 | Workers' Compensation

When you are injured at work or contract an illness from your duties, workers’ compensation is there to help support you and make up for some of your lost income. But it can feel like your employer, and their insurance company, do not have your best interests in mind. You may be offered the option of settling your claim with a lump sum, but is that in your best interest?

Why can a lump sum be advantageous?

Lump sum settlements are not always an option, but the Massachusetts Workers’ Compensation Act does permit them when all parties are in agreement. Rather than collecting benefits weekly, for the duration of a workers’ compensation award, the employee collects a single payment upfront.

One of the primary advantages of taking a lump sum is that it can allow you to collect more money than if you collect your benefits every week. Let’s say the settlement includes an amount of money for one year of benefits, which you take in a lump sum. But your injury or condition improves after six months, permitting you to return to work. If you’d collected benefits weekly, they would have ended after six months, meaning you would receive only half the amount awarded through the lump sum.

How can a lump sum be against your interest?

The advantage of collecting more total benefits through a lump sum can also be a disadvantage – you now have to manage that money, rather than having a reliable weekly benefit payment. For some people, managing that money will be difficult and not worth the risk.

A lump sum agreement may prevent you from returning to work for your employer once you’re able to do so. Many people want to do exactly that, making a lump sum less desirable. Lump sums can also impact potential claims against third parties, who may hold some responsibility for your injury. Losing the chance to pursue a third-party claim may cost you more than a lump sum gives you.

Ultimately, whether to accept a lump sum agreement is a difficult decision that should be made carefully. To ensure you make the best decision possible, speak with a knowledgeable professional who is experienced in Massachusetts workers’ compensation law.