You may need medical treatment now while still paying everyday expenses like rent, groceries, and utilities. A letter of protection and pre-settlement funding can help with these different needs. A letter of protection allows a medical provider to wait for payment, while pre-settlement funding gives you money for personal expenses before your case settles.
This guide explains how each option works, how it can affect your settlement, and which one may be right for your situation.
Key Takeaways
- A letter of protection, usually shortened to LOP, pays a medical provider directly and only covers treatment, never rent or groceries.
- Pre-settlement funding pays you in cash, so you decide what it covers.
- The provider carries the risk on an LOP; a non-recourse funder carries the risk on funding, since you generally owe nothing if the case does not win.
- Only pre-settlement funding puts money in your hand. An LOP just defers a bill to a later date.
- Many plaintiffs use both at the same time, one for treatment and one for the household.
Letter of Protection vs Pre-Settlement Funding at a Glance
Letter of Protection | Pre-Settlement Funding | |
Who gets paid | The named provider, directly | You, in cash |
What it covers | Medical treatment only | Rent, bills, groceries, any cost |
When money moves | Never moves as cash to you | Usually 24 to 48 hours after approval |
Credit check required | No | No, with a non-recourse funder |
If the case does not win | Provider may still seek payment, terms vary | You typically owe nothing if non-recourse |
Cash in your hand | No | Yes |
Effect on your net check | Reduces it by the billed treatment cost | Reduces it by the advance plus the fee |
Needs a provider’s agreement | Yes | No |
What an LOP Actually Is
A letter of protection is an agreement that allows you to receive medical treatment now and pay the provider later from your settlement. Your attorney sends the letter to the medical provider, the provider agrees to wait for payment, and you understand that the bill will be paid from your recovery. You do not receive any money when the letter is signed. Its main purpose is to help you get treatment when you cannot afford to pay out of pocket.
However, the medical provider must agree to accept the letter. Some hospitals, doctors, imaging centers, and specialists may refuse because there is no guarantee the case will result in enough money to pay the bill. Your attorney cannot force a provider to accept one. If you see several providers, each provider may need to agree separately, which means some of your medical bills may be covered by a letter of protection while others are not.
Who Signs an LOP and Who Is Bound by It
Your attorney signs the letter, the provider countersigns to accept it, and you typically sign an acknowledgment that the bill is coming out of your settlement.
Once the attorney signs, most states hold that the attorney has a fiduciary duty to honor the letter and pay the provider from the proceeds before disbursing the rest to you. That duty is the reason providers accept these arrangements at all. Without it, the letter would be just a promise from a stranger, which most hospital billing departments would never accept on faith.
Ask your attorney to confirm, in plain terms, exactly which of your bills are covered by a signed letter and which are not, since a partial LOP that covers only your emergency room visit will not stop a separate specialist’s office from billing you directly.
Is a Letter of Protection a Lien?
Not exactly, although it can work like a lien in practice. A letter of protection is usually a private agreement between your attorney and medical provider, not a lien filed with a court or government agency. The provider expects to be paid from your settlement before you receive your share.
However, a formal medical lien may have stronger legal rights and could affect who gets paid first. Ask your attorney how each medical bill is classified so you understand what will be paid from your settlement and in what order.
What Pre-Settlement Funding Actually Is
Pre-settlement funding gives you access to part of your expected settlement while your case is still open. With your attorney’s cooperation, a funding company reviews your case and may provide you with a cash advance based on its estimated value.
DMS Funding provides non-recourse funding, which means repayment comes from your settlement. If your case does not result in a recovery, you generally do not have to repay the advance. Instead of traditional loan interest, DMS Funding charges a flat fee that can increase depending on how long your case takes to settle.
Most funding companies provide only a portion of the expected settlement, often around 10% to 20%. This helps leave enough money for attorney fees, medical bills, liens, and the amount you ultimately receive from your settlement.
What Each One Pays For
An LOP pays one specific provider for one specific course of treatment, and nothing more. It never becomes cash, and it cannot be redirected toward anything else, so a surgeon’s letter covers the surgery and stops there. If the same provider later refers you to a physical therapist, that referral needs its own separate letter, since the first one does not automatically extend to a different provider down the road.
Pre-settlement funding pays for whatever you decide it should, because it arrives as ordinary cash in your bank account. A typical use looks like a real household budget rather than the vague phrase ‘living expenses’: $1,400 for rent, $180 for the car payment, $500 for groceries over a few weeks, $220 for a child care bill, and whatever is left toward a health insurance deductible your treatment triggered.
None of that spending needs approval from the funder once the advance lands, and none of it requires a billing code, a provider’s signature, or any explanation of what the money went toward. That distinction is easy to miss when both tools get lumped together as ‘lawsuit money,’ but it is the entire reason a household in this position often needs both, not just one or the other.
Which Option Fits Your Situation
Four situations cover most readers who land on this page:
- If you need treatment and you have found a provider willing to accept a letter, take it first, since it costs nothing extra and solves the medical bill directly without touching your settlement math until disbursement.
- If you need cash for rent, a car payment, or groceries while the case is open, that calls for pre-settlement funding instead, because a letter of protection cannot touch a household expense no matter how the paperwork is written, even if the amount involved is smaller than a single medical bill.
- If your provider refuses to accept one, which happens more often with imaging centers and specialists than with hospitals, funding becomes the practical way to pay for that same care out of your own pocket in the meantime, and you settle up with the provider directly instead of asking them to wait.
- If your case looks likely to run past two years, which is common with medical malpractice claims and multi-vehicle accident cases, ask your attorney to revisit both arrangements periodically, since a long timeline changes the math on each one in a different direction, and a decision that made sense in month three can look different by month eighteen.
Using Both at the Same Time
Many plaintiffs use both options at the same time. A letter of protection allows a medical provider to wait for payment, while pre-settlement funding can help cover everyday expenses like rent, groceries, and utilities.
Both may be paid from your settlement, so it is important to keep track of how much you owe as your case moves forward. Ask your attorney for regular updates on your medical balances and funding payoff amounts. This can help you avoid surprises when your settlement is finally paid out.
What Happens to Repayment if the Case Ends Without a Recovery
These two options work very differently if your case does not result in a settlement. With a letter of protection, you may still be responsible for paying your medical bills if there is no recovery. Some providers may lower the bill or offer a payment plan, but others may still expect full payment.
Non-recourse pre-settlement funding is different. If your case does not result in a recovery, you generally do not have to repay the funding company. Before signing either agreement, make sure you understand the terms and have your attorney review them, since the rules can vary by state.
How Each One Affects Your Final Settlement Check
Here is a simple example of how both costs can affect your settlement. Say your case settles for $80,000. If your attorney receives about $26,640 in fees, that leaves $53,360. A $6,000 medical bill under a letter of protection would bring the balance down to $47,360. If you also had an $8,000 pre-settlement advance with a total payoff of $11,200, you would be left with about $36,160.
These numbers are only an example and do not reflect DMS Funding’s actual pricing. The main point is that attorney fees, medical bills, and funding payoffs can all be deducted from your settlement before you receive your share. Keeping track of these balances throughout your case can help you better understand how much money you may ultimately receive.
When Pre-Settlement Funding Is the Better Call
Funding tends to be the better call when timing and flexibility matter more than avoiding a fee altogether. A letter of protection only ever solves one bill with one provider, and it does nothing for the month your landlord does not care why the rent is late.
DMS Funding typically approves within 24 hours and never checks your credit, because approval turns on the strength of your case file and your attorney’s input, not on a credit score or your current income. This comes up often on medical malpractice cases and car accident claims, where treatment can stretch on for months while household bills keep arriving on the same schedule they always have. If the gap in your finances is broader than one medical bill, funding closes it in a way a letter of protection was never designed to do. Talk to your attorney about timing either request early rather than waiting until a bill is already overdue, since both arrangements move faster when there is no immediate crisis forcing the decision.
Learn more about what to ask before getting a loan from pre-settlement companies to make sure you get the right funding.
Frequently Asked Questions
Is a letter of protection a lien?
Not exactly. A letter of protection is usually a private agreement between your attorney and medical provider, while a medical lien is created under state law. Both can result in medical bills being paid from your settlement, but a formal lien may have stronger legal rights. Ask your attorney how each bill is classified.
Can a doctor refuse a letter of protection?
Yes. Medical providers are not required to accept a letter of protection. Some doctors, specialists, and imaging centers may not want to wait until your case settles to get paid. If a provider does not accept one, you may need to consider another way to pay for treatment.
Can I get pre-settlement funding if I already signed a letter of protection?
Usually, yes. A letter of protection helps cover medical treatment, while pre-settlement funding can provide cash for other expenses. Your attorney and funding company will consider your existing medical bills when determining how much funding your case can support.
Does a letter of protection show up on my credit report?
Generally, a letter of protection itself does not appear on your credit report. Non-recourse pre-settlement funding also typically does not require a traditional credit check or get reported like a personal loan. However, unpaid medical bills may be handled differently depending on the provider and your situation.
Which one costs more by the time the case settles?
It depends on your case. A letter of protection usually doesn’t have a separate funding fee, but the medical bill itself can be expensive. Pre-settlement funding includes a fee that may increase the longer your case remains open. Ask your attorney to review the expected costs before deciding how much to use.
Get Funding While Your Case Is Pending
If a letter of protection covers your treatment but your household bills are still due, DMS Funding can help close that gap. See what your case can support, with no credit check and nothing owed if your case does not win.
