by John Darer CLU ChFC MSSC CeFT RSP CLTC
The terms “certain” and “guaranteed” frequently appear in settlement documents to describe payment obligations, as well as in structured settlement annuities and other income annuities. While the terms are often used interchangeably, do they truly have the same meaning?
Could their usage lead to potential confusion in the future?
Let’s consider one of the
most common types of structured settlement payments
Certain period and life. A certain period provides that payments will be paid for life, but will be paid for a minimum certain period of time whether or not the Measuring Life is alive when the payment is due. So if your structured settlement has monthly payments for life with 30 years certain it means that payments will be made for 30 years (360 monthly payments), whether or not you as the measuring life are living and then only if you are living from month 361 onward.
No new certain period if the original Measuring Life dies and a beneficiary starts receiving annuity payments
The certain period starts when the first payment of the annuity payment stream begins. There is no new certain period if the original measuring life dies and a beneficiary starts receiving the annuity payments. For example if the Measuring Life/Payee has monthly payments on a 30 years certain and life annuity and the Measuring Life dies precisiely15 years from the start of the existing payment stream, then 15 years (180 monthly payments) will be paid to the named beneficiaries.
Where could the term ” “guaranteed” cause confusion?
All structured settlement payments are contractually guaranteed, even where they are life contingent.
For instance, if you are receiving structured settlement payments with a 20-year certain and life annuity, and 22 years have elapsed since the payments began, the remaining payments are actually guaranteed to continue the rest of your life, after which they will cease.
Berkshire Hathaway Structured Settlements, through its underwriting companies, Berkshire Hathaway Life Insurance Company of Nebraska and National Indemnity Company, uses the term “certain” instead of “guaranteed” in its structured settlement quotes and contracts even refer to a lump sum payment as “certain lump sum”.