How Safe Are Structured Settlement Annuities?

If there is one thing you want to be 100% certain about, it is your money.  If you have an existing structured settlement, considering one or a lawyer for someone considering a structured settlement, it is only natural, considering the current economic environment why you may have questions about the financial security around structured settlement annuities.

What Is A Structured Settlement Annuity?

Structured settlement annuities are complex products, paid out to injured parties in lieu of one large lump sum. Within the terms of a structured settlement annuity, the payee never owns the annuity; the defendant’s insurance company does.

Structured Settlements Are Typically Issued By Life Insurance Companies

While you can use a US Treasury, we will focus on structured settlements issued by insurance companies. If you have children considering a structured settlement, we’re at the lowest point in terms of impairments in over 50 years.

How Safe Are Structured Settlement Annuities?

Most structured annuity settlements are written by the top 10 life insurance companies in the world.  The main risk is the ability of life insurance companies to withstand a market downturn, however, these big insurance companies have the cash to withstand the downturns, and the majority of the companies offering structured settlements are not going anywhere and have been around for over 150 years – that is since Abe Lincoln was president!

The bottom line here is your annuity is as safe as the insurance company you select to write the settlement.  If you pick one of the big companies with a good balance sheet, you should have no issues with the safety of your structured annuity settlement payments.  While it is certainly good to stay on top of things, these insurance companies have stood the test of time and a structured settlement is typically very safe.

Selling A Structured Settlement Annuity

So if you have a structured settlement and need to sell it for a lump sum of cash, you should talk to several different structured settlement purchasing companies.

  • Let them know what you are selling and what you want to get
  • Make sure you get your structured settlement offer in writing
  • Make sure it is emailed to you or given to you in a disclsure statement
  • Look at the net amount you will receive
  • Let them know what other companies are willing to offer you – you benefit from talking to several companies
  • Watch for hidden costs
  • Choose a company you feel comfortable with.

What Is A Structured Settlement

The only time people ever really hear about structured settlements is on late night television!  But knowing what they are ahead of time.

Structured settlements are financial settlements handled outside of the courtroom.  Typically these settlements are between the plaintiff and defendant’s insurance company.  The plaintiff receives a financial payment over a period of time and can not press charges against the defendant  for the same situation.

How Are Structured Settlements Initiated?

You have probably heard about people “settling outside of court”.  The result is typically a structured settlement.  Let’s say you are walking down the aisle in your favorite department store and a stack of paint cans falls on you causing bodily injury.  The Companies lawyers want to keep this out of court as it is expensive and damaging to a store’s reputation.  You would meet with their lawyers and come up with a monetary amount you would be paid so long as no further damages are claimed from this incident.  The result would be a structured settlement.

As part of the agreement, let’s say you accept $100,000 over 20 years.  This is an asset-backed security and guaranteed over the life of the term.  The IRS would consider this as non-taxable income.