Workers’ Compensation Attorney: How To Calculate A Settlement

How do You Calculate a Workers’ Compensation Settlement?


Under the standard workers’ compensation system, wage loss benefits will be paid out on a weekly basis and medical payments will be made as required by the injured employee. However, New Jersey law allows employees covered under the workers’ compensation laws to agree to a lump sum settlement.

Under a lump sum settlement, the total amount of workers’ compensation will be reduced, but the payment will be received all at once rather than over a period. This type of arrangement may be attractive to certain injured employees who are concerned about major debt obligations or who simply wish to have more control over their finances. A lump sum settlement award may also result in an avoidance of much of the future workers’ compensation collection process, resulting in a quicker award. Lump sum settlements are often preferable to insurers who are long-term investors that will be willing to save money not paying a full range of benefits.

To determine whether a lump sum settlement may be right for your workers’ compensation claim, you should consult with an experienced workers’ compensation attorney. Workers’ compensation attorneys have substantial experience advising clients in these areas. Depending on your situation, a lump sum settlement may or may not be the proper path to take, but it will always be a good idea to discuss the option with your attorney.

What is a Lump Sum Workers’ Compensation Settlement?

A lump sum workers’ compensation settlement is an agreement between the injured employee and his or her employer and workers’ compensation insurance company. The agreement allows an injured employee currently receiving workers’ compensation to forego all future workers’ compensation claims from the injury in question in exchange for a lump sum of money up front. Essentially, an employee who agrees to a lump sum settlement is selling his or her right to future workers’ compensation for both medical benefits and wage loss benefits.

It is important to remember that a lump sum workers’ compensation settlement is a one-time payment. If you agree to a lump sum settlement agreement, you will no longer be eligible for either standard wage loss workers’ compensation payments on a weekly basis or payment of medical expenses. Make sure that you take this fact into account before you agree to a lump sum workers’ compensation settlement.

Am I Eligible for a Lump Sum Settlement Award?

While workers’ compensation lump sum settlements are usually available, they are not always possible due to a lack of employee eligibility. To qualify for a lump sum workers’ compensation settlement, an injured employee must meet the following criteria:

  • The injured employee has been unable to work for at least four months due to a work-related injury, and
  • The injured employee is currently receiving some form of workers’ compensation insurance.

Once you take a lump sum settlement, you become ineligible for additional workers’ compensation.

How to Calculate a Lump Sum Settlement

The first thing to understand is that there is no specific formula for calculating a lump sum settlement. A lump sum settlement is first and foremost an agreement between an insurance company and an injured employee. This means that the amount is going to have to be acceptable to both parties and will not be tied down by a specific statutory formula or other prescriptions on an amount.

Factors to Consider Before Taking a Lump Sum Settlement

Because a lump sum settlement forfeits the right to all future workers’ compensation payments, you should make sure that you carefully consider your situation before signing an agreement. Remember, the lump sum settlement extinguishes your eligibility to receive any future medical payments or wage loss benefits, so be sure to consider the consequences of both types of benefits. Among the factors that you should consider before agreeing to a lump sum settlement include:

  • The severity of your injury and the possible need for unanticipated future medical care;
  • Your current medical condition;
  • The existence and costs of any upcoming scheduled surgeries or treatments;
  • The possibility that your health could get worse;
  • The existence of other non-work related medical issues that could prevent work;
  • Your ability to return to work in the future to make a living wage;
  • Whether you have sufficient education and skills to attain a job in any desirable field;
  • The amount of the settlement and whether it will provide financial security until you can return to work; and
  • Whether you are also receiving social security disability

Depending on your situation and your evaluation of these factors, a lump sum settlement agreement may be a great thing for your recovery and future financial stability. In other cases, however, it may be a raw deal, particularly where medical complications arise that prevent you from returning to work in a timely fashion.

An important factor that you should keep in mind is that the insurance company is trying to bet against you. In agreeing to a lump settlement agreement, the insurance company is betting that you will not only have persistent issues but that there is a risk of future medical problems that could exacerbate your current injuries. Otherwise, there would be no incentive to offer an upfront payment aside from the long-term money saved. Be very careful before entering into a lump sum settlement, and make sure that it will be a good deal for you.

It becomes ideal to enter into a lump sum workers’ compensation settlement agreement when you have stopped making progress in your recovery and it is unlikely that future medical treatment will improve your position. This is because the medical treatment portion of the workers’ compensation package is the most valuable asset you have due to its potential to pay for thousands of dollars of medical care. Similarly, if you have medically improved, it is also likely that you will be able to return to work soon.

Consult with an Experienced New Jersey Workers’ Comp Attorney Regarding the Advisability of Entering into a Lump Sum Settlement

Deciding whether to accept a lump sum settlement can be a difficult decision depending on your specific circumstances. That is why it makes sense to discuss the best course of action with an experienced attorney. Not only is your attorney likely intimately familiar with the nature of your claim, your attorney will understand the strategy of the workers’ compensation insurance company. Your attorney’s advice can help bring perspective to a complicated question.

The workplace injury lawyers at The Law Offices of Craig A. Altman are ready to assist in determining whether a proposed lump sum settlement offer makes sense for you. Our team of attorneys possesses a deep understanding of the New Jersey workers’ comp system. Contact our office today to schedule a consultation. Call today at 856-327-8899 or fill out a quick contact form so a member of our legal team can follow up with you.

craig altman logo

Contact Us

For a Free Consultation