by John Darer CLU ChFC MSSC CeFT RSP CLTC
Difference Between Annuities and Structured Settlements
A Financial Product vs a Method to Pay Damages
An annuity is a financial product, while a structured settlement is a method to pay damages in a legal case.
Annuities are offered by life insurance companies and sold through state licensed and insurer appointed agents or brokers. Annuities are designed to receive and grow funds from an individual and, upon annuitization, provide a stream of periodic payments to the individual at a future date. Annuities may be fixed, variable, or linked to one or more financial indexes, generating payments for a specified duration or for the lifetime of the individual.
Annuities are primarily used as a means of securing a stable cash flow for an individual during their retirement years.
A structured settlement annuity is a customizable specialty annuity that is used as a “qualified funding asset” to resolve legal disputes or litigation.
A structured settlement may contain one or more payment streams. These payment streams can be of different types, amounts and duration making them ideally suited for addressing known needs with a single contract. This could be very useful in addressing known future medical expenses.
Structured settlement payees are permitted to name or change beneficiary.
More information about structured settlement annuities
Some of the gobbledygook churned out by, or on behalf of, Structured Settlement Factoring Companies is truly a masterpiece of confusion. I’ve taken the liberty of untangling a few knots below.
Structured Settlements are a Method to Compensate for Damages in Civil Liability Cases
- Some structured settlement factoring company publications incorrectly refer to civil defendants as being found “guilty.” In reality, defendants in a civil case are not found guilty or sentenced to jail for a personal injury matter. In criminal court, a conviction requires proof “beyond a reasonable doubt.” In contrast, in civil court, a plaintiff prevails by proving claims by a preponderance of the evidence (“more likely than not”), and the defendant is found liable, not guilty.
- There may be certain occurences that give rise to a civil suit as well as criminal lawsuit. For example a drunk driver kills or maims another driver, passenger, or pedestrian.
- In criminal court you can be taking away someone’s freedom, citizenship and/or life.
- A civil judgment takes away their money or enjoin certain behavior, not freedom. The OJ Simpson case is a case in point. At his criminal trial, OJ was found not guilty of June 1994 murders of Nicole Brown Simpson and Ron Goldman, yet found liable by “a preponderance of evidence” in a later civil trial, in which plaintiffs were awarded a sum of money. OJ’s later incarceration at the time of original posting, was the result of an armed robbery conviction, following a criminal trial. Simpson passed away April 10, 2024.
Definition of Structured Settlement Back to Front
- A structured settlement doesn’t mean payments are converted from a lump sum; instead, part of the compensation for resolving the plaintiff’s case comes in the form of the structured settlement payments themselves.
- Structured settlement payments can be immediate, deferred, market-based, a mix of these, or even other variations. For more detail about types of structured settlement payments, please see Types of Structured Settlement Payments | Your Structured Settlement Payment Options (4structures.com)
Last updated February 23, 2025
Leave a Reply