Types of Structured Settlements and Payouts

Structure settlement companies

Personal injury cases are commonly resolved with the use of settlements, which compensate the injured person for losses that they suffered as a result of the injury. Compensatory damages are generally paid for things like pain and suffering, lost wages, loss of ability to work, loss of consortium, and medical costs. There are a couple of different types of structured settlements which can pay out a few different ways.

Types of Structured Settlements
There are two main types of structured settlements. One is referred to as the assigned method, which means that the liability insurer that is financing the settlement gives the funds to an assignment company, which holds the settlement in an annuity and pay out to the recipient in increments at regular intervals.

The second main type of structured settlement is the buy and hold method. This means that the liability insurer hands over the settlement to a life insurance company, which hold an annuity and pays it out to the recipient. The injured person or recipient of the settlement cannot own the annuity themselves, or the tax benefits of it will not work.

Types of Payouts

  1. Monthly: This type of structured settlement cash payout is paid monthly and the amount typically varies according to some index.
  2. Yearly: Yearly settlement annuity payments are paid once annually and are typically the same amount each time
  3. According to Inflation: In these cases, structured settlement cash payments are made regularly, but like their monthly counterparts do change, in this case, according to inflation.

An annuity structured settlement is usually set in stone once the agreement is made. If an issue arises in which the recipient of the settlement needs a lump sum from the annuity, there are usually penalties and fees associated with withdrawing it. The only option then, usually, is to sell the annuity to a company that pays cash for structured settlement payments. See this reference for more.