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What Is A Structured Settlement Annuity?

Many people are injured each year because of another person’s or company’s negligence or intentional actions. Some people even lose their lives because of devastating events caused by others, and their loved ones may suffer financially for years to come as a result. If you or your loved ones have been negatively affected by an accident, a workers’ comp issue, a product liability event, medical malpractice or something similar, you may seek financial compensation for medical bills, lost wages, pain and suffering and more through a civil lawsuit. If you win your lawsuit, the judge may award you financial compensation in the form of a structured settlement annuity. With a closer review of what a structured settlement annuity is and what your alternative options are, you can make a more informed decision about your financial situation.

What Is a Structured Settlement Annuity?

Structured SettlementAn annuity is a financial vehicle that is typically established by a life insurance company. The lump sum amount of the financial award provided to you by the court is established in an annuity, and the annuity gives you regular installment payments for a defined period of time. In many cases, annuity payments are made monthly, but there may be instances when they are paid quarterly or even annually. An annuity is typically an interest-bearing structure, so your total return over the life of the annuity may be more than the face value of the financial award that the court issued.

The Benefits of a Structured Settlement Annuity

There are numerous benefits associated with a structured settlement annuity, and these benefits can improve your quality of life for years or even decades. In many cases, the payments from a structured settlement annuity may be used to supplement lost wages, such as if you need to take time off work to recuperate after being injured. They may also be used to pay medical bills, to get necessary therapy and rehabilitation or for other related purposes. In some cases, they may simply be used to alleviate pain and suffering.

When a Lump Sum Amount is Preferred

Structured SettlementWhile there are significant benefits associated with receiving regular installment payments from a structured settlement annuity, there are times when a lump sum payment of the financial award is needed or preferred. For example, some people may have ongoing medical bills that payments can easily provide for, or they may need to use the regular payments to supplement lost wages if they are unable to work. However, others may have incurred hefty medical bills after hospitalization or surgery, and these bills may be due now. In some instances, you may be able to sell your annuity for a lump sum payment. However, keep in mind that some states require the court to approve the sale of the annuity first. In addition, if the annuity was awarded to a minor, you may not be able to sell the annuity until the child reaches the age of 18. Because of this, you should consult with your attorney before beginning the sales process. You also should be aware that an annuity buyer usually will not pay you 100 percent of the face value of the annuity. This means that you may lose money overall if you sell your annuity for a lump sum payment.

Receiving a financial award from the court after filing a personal injury case can drastically improve your life for months or even years to come. However, how the award is provided to you may be critical to your financial well-being. If you have received an annuity payment structure and would prefer to have a lump sum amount, carefully examine the pros and cons of selling the annuity before you decide to move forward with the sale.