Settlement Annuity Guarantees Your Income Stream

2007-03-08 10:33:40

( Insurance )



If you stand to receive substantial amounts from claim settlements, you have two basic options regarding its distribution: either you ask for it in a lump sum, or you arrange for instalment payments through a settlement annuity.
Insurance companies have offered structured settlement annuity products for substantial claim settlements from auto insurance settlements, life insurance settlements and workers’ compensation claim settlements. More recently, settlement annuity arrangements have been offered for attorney’s fees arising from a successful suit for personal injury claim settlements.

When you ask for your claim settlements in a lump sum, it is usually because you have an immediate need for cash, perhaps to meet some pressing expenses or to purchase an expensive item. But unless you invest the funds wisely, you stand the risk of seeing the money dissipated. Your future expenses, like further education for the children or your future health care requirements, may remain uncovered.

A settlement annuity plan will guarantee that you will have a regular inflow of cash payments to help cover your future expenses. You can arrange for the settlement annuity to be paid according to a schedule that fits your needs – in annual sums paid over a number of years, or in periodic lump sums paid every few years.

If you do choose the structured settlement annuity route, make sure that you set it up to maximize the tax-avoidance advantages of a structured settlement. Tax obligations can be significantly reduced or in some cases can be totally removed.

You should also make sure to avoid settlement annuity plans that remit payments only while you are living. You can ask for a guaranteed period annuity, usually ten or twenty years, which commits the insurer to continue payments after you die to your designated beneficiary. So your income stream continues to be guaranteed. Your heirs will be happy to know that annuity benefits are not governed by your will and, therefore, do not go through probate.


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