Structured
Settlements
You have probably heard the term “Structured
Settlements” on a TV ad and wondered what exactly it meant.
It's not one of those terms you hear every day...
A structured settlement
is a legal contract under which an insurance company decides
to make periodic payments to an injured person as part of a
bodily injury claim, or to a surviving family member to whom a large
settlement has been awarded... Finding a buyer
Definition
Senior Settlements
What are annuities
Tax Free Payments
Structured Settlement Companies
Structured Settlement Annuities
Selling Settlements
Sell Structured Settlements
Annuity for Cash
Selling for cash
Sell annuity payments
Settlment Payouts
Planning Life Settlement
Life Settlments
Life Settlments Articles
Immediate Annuities
Get cash for your Structured Settlment
Get cash for you annuity
Senior Life Settlments
How and When
Who to sell your payout
Selling Structured Payouts
Selling Monthly Settlements
Managing Structured Settlements
Fixed Annuity Options
Choosing buyers of structured settlements
Cash for annuity payments?
Buyers
Annuity Rates
What are annuities?
When one refers to annuities, one essentially uses a legal
term that has two very different meanings. In principle, however, the
term annuity is a means of paying out funds over a set period of time.
For the purposes of differentiation, the first use of the term “annuity” is in the context of the insurance industry. Here, an annuity more accurately refers to an immediate annuity. An immediate annuity is an insurance policy that makes a series of regular payments (usually annually) over a given period of time. Its main purpose is to distribute savings accumulated over a period of time. A very good (and common) use or example of an immediate annuity is a pension for a senior citizen who is about to go into retirement. .
Stocks and Bonds
The second use of the term “annuity” is in the context of investments, stocks and bonds. It refers to a contract that offers buyers a safe interest rate of return on their money or on stocks where growth is dependent on market performance. This type of contract is called a deferred annuity. The main difference is that while an immediate annuity distributes savings, a deferred annuity is a means of accumulating savings.
However, since this usage is not suited to our purposes, let us leave it aside and concentrate on immediate annuities. From hereon, any and all reference to the term “annuity” will refer to an immediate annuity – yes, the one that has to do with insurance.
By law, an annuity contract can only be written or originated by an insurance company. An annuity contract may be purchased from the originating insurance company or its representatives, or from a duly licensed bank or stock brokerage house.
What happens when you enter into an annuity contract?
A typical annuity contract involves a lump sum or a series of payments (known as premiums) paid by a person to an insurance company. In return for these payments (whether lump sum or premiums), the insurance company pays the person an annual fixed amount, or income, for the rest of that person’s life.
When does one enter into an annuity contract?
Since an annuity is generally a means of paying regular funds to an individual, one may enter into an annuity in any circumstance where a cash settlement is required. One purpose annuity payments would serve is compensation. A prime example would be a personal injury suit where the injured party is compensated for his losses using a structured settlement annuity, which he receives tax-free. This means that instead of giving him a lump sum settlement, that the company that has caused his injury pays him a fixed income over a given number of years.
Another means of entering into an annuity contract is for investment purposes, where it is called an investment-structured annuity. As mentioned earlier, a pension plan would be a good example of such a contract..
This type of annuity can be a very sound investment. However, if you are considering buying an investment-structured annuity, such as a pension plan, it’s important to know all the possible hidden costs.
First of all, the main difference from a compensation-structured annuity (as in the personal injury example above) is that interest on an investment-structured contract is taxable, reducing the benefit to its buyer.
Second, there may be significant costs for administration.
Third, and most importantly, there may be large surcharges for early release of your funds. It’s important to know how much you’ll be charged for getting a lump sum early, to maximize the benefit of your investment annuity.