Life Insurance Information

Ann asked: rnrnSometimes when a plaintiff settles a case for a large sum of money, the defendant, the plaintiff’s attorney, or a financial planner consulted in association with the settlement, will propose paying the settlement in installments over time rather than in a single lump sum. When a settlement is paid in this manner it is called a “structured settlement”. Often the structured settlement will be created through the buy of one or more annuities, which guarantee the future payments.rnrnA structured settlement can provide for payment in pretty much any schedule the celebrations select. For example, the settlement might be paid in annual installments over a number of years, or it might be paid in periodic lump sums every few years.rnrnPotential Disadvantages of Structured SettlementsrnrnSome people who enter into structured settlements feel trapped by the periodic payments. They might wish to purchase a new home, or other pricey item, yet be unable to muster the resources because they can’t borrow against future payments under their settlement.rnrnSome people will do superior by accepting a lump sum settlement, and investing it themselves. Many standard investments will give a greater long-term return than the annuities used in structured settlements.rnrnSelling a Structured SettlementrnrnIf you have a structured settlement, you may have been approached by a company interested in purchasing your settlement, or might be curious about selling your settlement in return for a lump sum buyout. About two thirds of says have enacted laws which restict the sale of structured settlements, and tax-free structured settlements are also subject to federal restrictions on their sale to a third celebration. Also, some insurance companies won’t assign or transfer annuities to third celebrations, to discourage the sale of structured settlements. As a consequence, depending upon where you live and the terms of your annuities, it might not be possible for you to sell your settlement.rnrnKeep in mind that companies which purchase structured settlements intend to profit from their purchase, and sometimes their offers may seem quite low. You might benefit from approaching more than one company in relation to the sale of your settlement, to make sure that you obtain the highest payoff. You also want to be sure that the company which wants to buy your settlement is established, well-funded, and reputable - you don’t want a fly-by-night outfit to obtain the rights to your annuities but to disappear or go bankrupt before paying you the buyout money. You might have to go to court to get a judge to approve the buyout. It is usually a good idea to consult with a lawyer before entering into an agreement to sell your settlement.rnrnSpecial ConsiderationsrnrnAny person entering into a structured settlement should be on guard for potential exploitation in relation to the settlement:rnrnExcessive Commissions - Annuities can be highly profitable for insurance companies, and they often carry very huge commissions. It is important to ensure that the commissions charged in setting up a structured settlement don’t consume an inappropriate percentage of its principal.rnrnOverstated Value - Sometimes, after negotiating a particular settlement figure, the defense will overstate the value of a structured settlement. As a result the plaintiff, in accepting the settlement, in fact obtains a significantly lower dollar value than was concurred upon. Some defendants have nominally paid the full amount of the settlement, knowing that they would later obtain significant rebates from the annuity companies they used. Plaintiffs should think about compariing the fees and commissions charged for similar settlement packages by a variety of insurance companies, to make sure that they are in fact getting full value. A plaintiff may wish to make it a condition of the settlement that the defendant will actually pay the full value of the settlement in setting up the structured settlement, and that any rebates received by the defendant for annuities included in the settlement be payable to the plaintiff.rnrnSelf-Dealing - There have been cases where the plaintiff’s lawyer is also in the insurance business, and sets up a structured settlement on behalf of a client without disclosing that the attorney is purchasing the annuities from his own business, or is pocketing a large commission on the annuities. Similarly, there have been situations where the plaintiff’s attorney has referred the client to a particular financial planner to set up a structured settlement, without disclosing that the financial planner will be paying the attorney a referral fee in relation to the client’s account. Make sure that you know what financial interest, if any, your lawyer has in relation to any financial services sold or recommended by the lawyer.rnrnLife Expectancy - It is unfortunate, but many people who receive big personal injury or workers’ compensation settlements will have a shortened life expectancy as a result of their injuries. It is important to consider life expectancy in association with any structured settlement, and to take into account whether it is appropriate to enter into an annuity where payments will cease upon death. Sometimes it will make sense to insist upon an annuity that pays a minimum number of payments, or one that’ll pay a balance into the plaintiff’s estate, such that the value of the settlement isn’t lost to an insurance company upon the plaintiff’s untimely death.rnrnUsing Multiple Insurance Companies - For more massive settlements, it often makes sense to purchase annuities for a structured settlement from several different companies, dividing the settlement between those companies. This can provide you with protection in the event that a company that issued annuities for your settlement package goes into bankruptcy - even in the event that one of the companies defaults in part or in full on your settlement payments, you would still receive full payment from the other companies.rnrnAdditional ResourcesrnrnSelling Your Structured Settlement - The costs and benefits of selling a structured settlement.rnrnCash Payment For Your Structured Settlement - What should you take into account before selling your structured settlement?rnrnCaffeinated Content for WordPress

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