Traditionally, damages paid for injury compensation have been by way of a lump sum payment to the claimant when the amount of the settlement is agreed or awarded. However, in recent years, some claims have been settled by a different method known as a "Structured Settlement".

This type settlement is sometimes used where the claimant has suffered catastrophic injuries meaning that the amount of compensation awarded is intended to fund special care and medical attention for the remainder of the claimant's life. When such claims are dealt with by a lump sum settlement there is a risk that the money might not be managed properly and over time the fund might be exhausted or become insufficient for the claimant's needs. This would obviously be a very serious problem.

Under a Structured Settlement, the claimant receives not a lump sum but regular periodic payments set to fund the claimants needs adequately and for as long as is necessary. The advantage of this form of settlement from the claimant's point of view is that it removes uncertainty and provides long term finacial security.

The Structured Settlement may be agreed to privately between litigants or sometimes may be required by the court. The settlement is often funded by means of an annuity and because of the length of time for which it is likely to be payable, needs to adequately cater for future inflation so that the value of the settlement is not eroded over time.

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