Structured Settlement Annuity

What Does Structured Settlement Annuity Mean?

A structured settlement annuity is a method for someone who wins a legal settlement to receive their payout. Instead of receiving the entire amount as a lump sum, the plaintiff places the money in an annuity, which is a type of financial contract. The annuity not only invests the settlement, allowing it to grow over time but also provides the plaintiff with regular payments according to a set schedule. Because a structured settlement annuity is one specific use of an annuity, it helps to understand how annuities generally work before accepting one as part of a settlement.

Insuranceopedia Explains Structured Settlement Annuity

You may receive a structured settlement annuity as part of the court decision. In this case, if you need a lump sum, you can sell the annuity to a settlement company, a financial or insurance company that specializes in managing these types of investments. Conversely, if you receive a lump sum, you can use it to purchase a structured settlement annuity. This can be a helpful way to budget the money and is a wise choice for anyone who has difficulty managing large sums, especially if they are financially dependent on the settlement. These products are typically issued by life insurers, so the financial strength of the carrier matters, and many plaintiffs compare the top-rated life insurance companies before agreeing to the specific annuity in their settlement.