Structured Settlement Annuity
If you’ve won a lawsuit or injury claim, you may have the option to receive your money over time instead of all at once. This is called a structured settlement annuity. It’s a common way for people to get regular payments for many years after an accident, injury, or legal case.
In this article, we’ll explain what a structured settlement annuity is, how it works, its benefits, and what to consider before choosing this option.
What Is a Structured Settlement?
A structured settlement is a financial arrangement where someone receives their legal settlement money in scheduled payments over time instead of a one-time lump sum.
These payments usually come from a special insurance product called an annuity, which is bought by the company or person who has to pay the settlement.
This option is often used in:
- Personal injury lawsuits
- Workers’ compensation claims
- Medical malpractice cases
- Wrongful death settlements
What Is a Structured Settlement Annuity?
A structured settlement annuity is a type of insurance policy that provides guaranteed payments over a period of time. Instead of getting all your money at once, the annuity gives you regular payments—monthly, yearly, or however you choose.
The insurance company manages the money and sends you payments based on your agreement.
How Does It Work?
Let’s say you won a $500,000 injury settlement. Instead of getting it all at once, you agree to receive:
- $2,000 per month for 20 years
- A larger payment every 5 years for major expenses
- Coverage for medical costs as needed
The other party (usually an insurance company) will buy an annuity in your name that sends you these payments. You don’t have to worry about investing the money or running out of funds.
Benefits of Structured Settlement Annuities
1. Guaranteed Income
You’ll receive regular payments for years, which helps with budgeting and managing expenses.
2. Tax-Free Payments
In most personal injury cases, the payments you receive from a structured settlement are tax-free under U.S. law.
3. No Investment Risk
The money is handled by a top-rated insurance company. You don’t have to worry about stock market ups and downs.
4. Custom Payment Plans
You can design the payment schedule based on your needs. For example:
- Monthly living expenses
- Larger amounts during children’s education years
- Medical expenses over time
5. Protects Against Overspending
A lump sum can be spent quickly if not managed well. Structured payments ensure long-term financial security.
Are There Any Downsides?
1. Less Flexibility
Once the plan is set, you can’t easily change it or take out extra cash.
2. Inflation Impact
If your payment doesn’t include cost-of-living increases, the value of the money may decrease over time.
3. You Can’t Invest the Money Yourself
If you’re a smart investor, you might prefer managing your own money. Structured settlements don’t give you that choice.
Who Should Choose a Structured Settlement Annuity?
This option is best for:
- People who want steady, long-term income
- Those with ongoing medical or living expenses
- Minors receiving a settlement
- Anyone who isn’t confident managing a large sum of money
If you need money slowly over time, a structured settlement is safer than getting everything at once.
Can You Sell Your Structured Settlement?
Yes, in some cases. If you later need a large amount of cash—like for buying a home, paying for education, or medical treatment—you can sell some or all of your future payments to a company in exchange for a lump sum.
But be careful:
- You may get less than the actual value of your settlement
- The court must approve the sale
- It may take several weeks to finalize
Only consider selling if you really need the money and understand the long-term effects.
How Are Structured Settlement Payments Made?
The payments are usually made by a life insurance company that issued the annuity. These companies are highly regulated and have strong financial ratings. Your agreement will outline:
- The payment schedule (monthly, yearly, etc.)
- Amount of each payment
- Start and end dates
- Lump-sum payments, if any
You can also name a beneficiary—someone who will receive the money if you pass away.
Top Structured Settlement Annuity Providers
Some of the most trusted companies offering structured settlement annuities include:
- MetLife
- Pacific Life
- Prudential
- Berkshire Hathaway
- New York Life
These companies have solid reputations, strong financial ratings, and experience in handling large settlement funds.
What Should You Ask Before Accepting a Structured Settlement?
- How long will the payments last?
- Can payments increase over time with inflation?
- What happens if I die before the annuity ends?
- Can I sell the payments later if needed?
- Who guarantees the payments?
Always talk to a financial advisor or lawyer before signing any agreement. They can explain your options and help you choose what’s best for your future.
Final Thoughts
A structured settlement annuity is a smart way to protect your settlement money and ensure long-term financial support. It offers guaranteed, tax-free payments without the risk of losing your funds. While it’s not flexible like a lump sum, it can give you peace of mind and financial stability for years.
If you’re offered a structured settlement, take time to understand how it works, ask questions, and choose the option that fits your life best.