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The Beginner’s Guide to Structured Settlements
In the legal world, one of the most common types of settlement is the structured settlement. It can sometimes be a difficult topic to figure out. If you want to know the basic information about structured settlements, take a look at the information below.
We should first look at how a structured settlement comes about. In a structured settlement, a person who has been injured or otherwise offended will be able to get a settlement from a defendant for damages. The terms of the settlement dictate that the injured person will abandon his lawsuit, and the defendant will pay the penalties associated with the settlement using a number of regular installments. The claimant will often do this because he is guaranteed to get his money, while the defendant will get the benefit of not paying it all at once.
You’ll find that there are two different methods that insurance companies will utilize in putting together a settlement of damages. One of the options is for the insurer to purchase some kind of annuity directly from an insurance company. The second option, which is used less frequently, is to have the defendant put together a third-party annuity that is managed and operated in a way that allows regular payments. This is often compiled in the form of a regulated annuity or some other obligation coming from the government.
Whenever a defendant and his insuring company opt to go with the first option, the annuity will be purchased from life insurance providers directly by them. You can think of this as a way to put some asset down as collateral. The claimant’s damages will be funded directly by this annuity, since it will be set up to create just the right amounts of money to cover the responsibilities. The annuity will directly pay money to the claimant through the use of a similar policy to any other life insurance policy, which makes the entire process quite simple.
If both parties agree to go with the second option when it comes to payments, the defendant will be keeping the long-term payments out of his own records. This is accomplished by having a third party take over all responsibility and obligation to handle the payments, resulting in what is referred to as qualified assignments.
Of course, the defendant still has to pay a set fee to the third party in order for it to take care of this work properly. At the bare minimum, this fee that is assessed will have to be enough money so that the third party can buy the necessary annuity.
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