Do Lump-Sum Payments Help or Hurt in Workers’ Comp Cases?

In some Colorado workers’ comp cases, injured workers with permanent disabilities have the option to choose a lump-sum payment instead of receiving monthly benefits.

Lump-sum payments aren’t right for everyone, but in many cases, they can provide injured workers with the financial help they need to get back on their feet after a devastating injury. For example, some beneficiaries use lump-sum payments to pay for modifications to their homes or to pay off debts that accrued while they were not working.

However, some workers’ comp insurers have been dubious of agreeing to lump-sum payments because they worry that giving workers large sums of money might make them less likely to return to work right away. A recent study has disproved this fear.

The study, conducted by the Workers Compensation Research Institute, reviewed the cases of 2,138 workers who were injured in 2004 and later received lump-sum payments. It then tracked the workers’ employment status through 2008.

Most workers – nearly 80 percent – did not have a change in status; if they were working at the time of receiving a lump-sum payment, they stayed employed (and vice versa). However, for those that did change employment status, more returned to work than left. The only exception was for older workers, who were more likely to leave the workforce after a settlement.

Ultimately, the researchers concluded that a lump-sum payment could actually encourage an injured worker to return to work. They hypothesized that lump-sum payments might help workers close stressful chapters in their lives and move on to something new.

Source: Business Insurance, “Lump-sum settlements encourage injured employees to return to work: WCRI,” Roberto Ceniceros, July 11, 2012.

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