A structured settlement is a professional term used for a form of financial arrangement that is to be paid on periodic basis. This settlement is usually dictated by the Internal Revenue Code. According to this term, a person agrees to pay divided or structured amount of cash for a settlement over any claimed dispute in the court of law. Structured settlements are now a common law in major countries like Canada, Australia, England and America. According to this law, instead of paying lump amounts, you can give payments divided according to months or years when the two parties agree on a mutual time period.
A structured settlement may not necessary be used for any injury claim purpose. It is used generally by common people who want to regulate their spending habits. Because they cannot do it by themselves, they rely on insurance companies. In return, the person gets a limited amount of money that is given out for a specific time.
Along with structured settlements, we often also see the word “annuity” joined with it. Annuity is usually related with insurance policies. A technical definition as seen in financial theory of annuity would be, “Any terminating stream of fixed payments over a specified period of time”. Your savings account, your insurance and even mortgage is your annuity. In simple layman terms, an annuity is an income amount that is sold by the insurance company. There may be a lifetime annuity or a period certain annuity.
Structured Settlement and Annuities
Structured settlement and annuities come together and form the process of “structured settlement annuity”. In this process your insurance provider will give you an amount of guaranteed income for a settled time period in case of any accident or injury claim. This sort of settlement is quite beneficial as the money is often free from government taxes and works perfectly for people who want to deposit a lump amount just to have it distributed out in a managed and organized way. However, structured settlement and annuities could limit a person’s ability to utilize his bulk amount for any large purchase. The company may also profit on your lump sum, while you could have also earned that profit personally. Read More