Annuity Payments
Understanding Annuity Payments
Typically when an individual is awarded a structured settlement for
personal injury, etc., their attorney and the payer's insurance company
negotiate a settlement that is based on the insurance company purchasing
an annuity. The annuity payments are paid-out in a combination of
principal and interest over a long period of time and commonly on a very
restrictive schedule of disbursement. This type of annuity is known as a
non-assignable annuity that is funded by a single premium.
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Payment Options
There are a variety of annuity payment options that can be arranged in a
structured settlement. The individual and their attorney should thoroughly
discuss each one to insure that their future needs will be met
appropriately. A few of the payment options that may be offered by an
annuity issuer are: Life - Annuity payments are made for as long as the
annuitant lives for the "period certain," whichever is longer. Payments
may be leveled or at an increasing rate; Period Certain - This calls for
regular repeating annuity payments of a specified amount. The payment
amount may be level or increasing regularly (typically annually) by a
specific percentage or in fixed steps to help keep up with the cost of
inflation. Payments can be weekly, monthly, quarterly, semiannually or
annually; and Installment Refund - Annuity payments are made for as long
as the annuitant lives. Payments terminate when the annuitant dies, unless
total benefits paid at that time are less than the cost of the annuity. In
such an event, annuity payments are made until the total benefits equal
the cost of the annuity. >>
Annuity Buyers
Structured Settlement Annuities
A structured settlement annuity is where an individual receives
compensation over a period of time for damages sustained in an accident,
etc. These types of settlements may include wrongful death, personal
injury, and medical and legal malpractice. Because the payments are
usually paid over a prescribed period of time, often defendants will
purchase an annuity from an insurance company in order to hedge the cost
of the payout to the plaintiff.
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Structured Settlement Annuity Buyers
There are a number of different types of structured settlement annuity
buyers around. Basically what they do is buy your annuity at a percentage
of the payments due. The percentage is partly based on how long it takes
for the annuity buyer to receive the total payout. The annuity buyers then
wait to receive the payments according to the original schedule. An
annuity buyer can buy all or just a portion of your structured settlement.
You decide which will be best for your situation.>>
Annuity 101
Learning Annuity 101 Basics
Part of annuity 101 is understanding that annuities are investment
vehicles that are sold primarily by insurance companies. Annuities play a
very important role in structured settlements, retirement planning, and
more. They enable you to save money and taxes while eliminating the fear
that you will outlive your savings. Basically, an annuity is an investment
contract or settlement policy that is between you and an insurance
company. >>
More on Annuities
Another large part of understanding annuity 101 is knowing that there are
many kinds of annuities - some are tailored for income, some for future
growth, and some as savings tools that are dependent on your income and
needs. Typically, when you are talking structured settlements, you are
talking about fixed, tax-deferred or no-tax annuities. This is where the
insurance company is given a lump sum of money, and it grows on a
tax-deferred or no-tax basis. These annuities can be great because you
don't pay any taxes on the earnings or profits that are built up in the
annuity until the money is taken out or in a structured settlement
situation, not at all. >>
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