Structured annuity settlements are a popular way to turn negligent injury claims or legal settlements into multiple payments over several years or even a lifetime. Settling with an annuity structure can provide predictability, security, and an opportunity for long-term growth. In this in-depth guide to structured annuity settlements, we’ll explain exactly how the process works and the benefits you stand to gain from them.
What is a structured annuity settlement?
A structured settlement annuity is an arrangement between two parties, typically an insurance company and the injured party following a settlement or personal injury claim. The annuity structure allows the injured party to receive their settlement over a period of time, rather than receiving it all at once. Depending on the agreement, the payments can be set up to last anywhere from a few months to many years or even a lifetime.
Benefits of structured annuity settlements
When it comes to annuity settlements, there are various benefits to consider. For starters, they provide claimants with lost wages, medical costs, and other financial losses due to a negligent injury or accidental death. By receiving payments over time, the annuitant can better budget and understand the expected flow of cash.
Structured annuities are also a good way for those who may not have good liquidity to receive their settlement in one single payment. By breaking the payout up into smaller chunks, the annuitant may not be hit so hard by large taxes or a high income distribution rate.
Additionally, annuities often feature inflation-protected designs, so the payments can keep up with the rising cost of goods and services. And for those who may not have the expertise and resources to manage financial investments, annuities provide an easy and secure option for long-term growth.
Understanding the structured annuity settlement process
When considering a structured annuity settlement, it’s important to understand the process that goes into it. First, the injured party must enter into an agreement with an insurance company or annuity provider. This agreement will be created after negotiations between the parties.
Before settling on an annuity structure, the parties must determine the duration of the payments and the amount of the payments. In most cases, the payments are larger at the beginning and smaller towards the end, although the exact details of the settlement depend on the agreement. The insurer involved also chooses the investment vehicle that will underpin the annuity.
