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Types and Examples of Structured Settlements

There are several reasons why you might be awarded a settlement. Often, your compensation will be structured such that you’ll receive the payments across a specific period. In such instances, the party at fault will buy an annuity that a particular insurance company backs to ensure that your settlement payments are made. 

There are several different payment options which makes it convenient both for the payers and payees. Sometimes, settlements are paid in their entirety soon after the case is completed. However, some annuities will make lumpsum payments on designated dates. Here are some types of structured settlements.

1. Life contingent annuity

This type of annuity from structured settlement companies requires the payee remain alive for any payments to be deposited. However, settlement annuities that allow beneficiaries to collect payments even after the awarded person is deceased are more popular. A life contingent annuity is less valuable to any factoring company that buys it. 

That is because the company will have to accept the risk of the payee dying. Some variations of this settlement are lump sum annuities. Therefore, if the awardee dies before the set payout date, no one will see any benefits.  

2. Lifetime payments

Another type of settlement payment is lifetime payments. Here the payments are made to the annuitant up to their death. Once they are deceased, the payments are not passed on to their beneficiary.

3. Period Certain

A period certain annuity comprises of regular payouts that occur over a certain period. This option usually allows for higher payments. There is a chance of the payments running out before the annuitant in question dies. If the annuitant dies before they do, their beneficiary can access their payment deposits until the period ends. 

4. Joint and survivor

These types of payments are more popular among married couples. In this scenario, regular payments will continue to be made to the beneficiary if the annuitant dies. This is as long as the beneficiary themselves are alive.

Examples 

There is a variety of structured payments, and here are some examples.

1. Personal injury settlements

Personal injury structured settlements are used to resolve lawsuits that you might file to claim that another individual or party’s actions have caused you serious injuries. With a structured settlement, you’ll have an easier time navigating through life even after your injury. 

2. Workers’ Compensation settlements

A workers’ compensation case is brought against an employer on the employee’s behalf. They are filed when an employee is killed or injured while on the job. They can be settled through this time of settlement. In 1997, the U.S. Tax Code was amended to encourage structured settlements in compensation cases concerning workers.

3. Wrongful imprisonment settlements

When you are exonerated after spending time in prison, you could file a lawsuit against government agencies that played a role in your wrongful conviction. A structured settlement will help you manage your finances when you’re released after the unjust conviction.

Settlements help individuals rebuild their lives after a difficult period due to someone else’s negligence or intentional actions. Structured settlements will help you manage your finances better as you navigate through life. It also ensures financial security over a more extended period.