How does a structured settlement work?
The defendant or its insurer agrees to make future payments to the injured party. In most instances, the defendants insurance company then funds its obligation by purchasing one or more annuities from a highly-rated life insurance carrier, which makes the payments to the injured party. These payments may be made for any length of time, even for the injured partys lifetime. In the event of the persons death, a guaranteed portion of the settlement may be made to the estate or a named beneficiary such as a spouse or child.
You have decided prior to the settlement of your claim that you will receive payments through a structured payout. You or your attorney negotiate with the person or company you are making a claim against (the defendant) to agree on what future payments will be. The defendant funds his/her payment obligation to you by buying an annuity with a payment stream that matches the agreement. The life insurance company that issues the annuity makes the payments directly to you when they are due. Sometimes defendants transfer their payment obligations to a third party through an assignment agreement. The third party (the assignee) has the sole obligation to pay you, and will buy and own the annuity. This assignment is an advantage to you because the assignees have extensive experience in handling the administration of structured settlements. The assignee can be more responsive to your questions and servicing needs. Before entering into a structured settlement, make sure the life insurance compan
