by John Darer® CLU ChFC MSSC CeFT® RSP CLTC Updated July 19, 2026
What is a structured settlement annuity?
A structured settlement annuity is a type of annuity that is used as a ‘qualified funding asset’, to pay periodic 
payments as consideration for a release in the settlement of lawsuits. A structured settlement annuity may include immediate or deferred payments, payments for a fixed duration or for life, , deferred lump sum payments, payments with fixed increases, payments that adjuts based on changes in an index such as the S&P 500 or other indexes with or without a cap. For more detail, see Types of Structured Settlement Payments Structured Settlement Options (4structures.com)
More than one type of payment can be in a single annuity contract which makes a structured settlement annuity an ideal funding vehicle for someone who has a myriad of different needs at different times and would like a core stable income plan for the future. The measuring life, whose life is used to calculate the cost of life contingent payments, may be medically underwritten to provide a rated age. If rated age is obtained it will reduce the cost of providing such payments with the company that has given the rated age.
Where can you get a structured settlement annuity?
A structured settlement annuity is a regulated insurance product issued by a life insurance company and can only be placed by licensed insurance agents or brokers who authorized by the annuity issuers to offer the product.. 5 companies who currently issue structured settlement annuities have been in business since the 1800s. Structured Settlement Companies | Top Listed Structured Settlement Companies (4structures.com)
What has to happen before a structured settlement annuity is placed?
- A settlement is a negotiated compromise .
- A structured settlement is a negotiated compromise whereby a claimant agrees to resolve a personal injury or tort claim by receiving some part of the settlement in the form of periodic payments on an agreed schedule.
- As part of the negotiations, a structured settlement can be offered by the defendant or demanded by the plaintiff.
- A key point is that there has to be an agreement and the agreement must include periodic payments as part of the consideration for the release of liability.
How are payments from a structured settlement annuity taxed?
- The taxation of structured settlement payments depends on the type of damages that the structured settlement payments represent.
- For workers compensation payments and for payments that represent damages for personal physical injury, physical sickness or wrongful death [i.e. excluded from gross income pursuant to IRC 104(a)(1), or IRC 104(a)(2), or IRC 139F] payments are income tax-free.
- Payments for other types of Payments for certain types of claims are generally taxable but may have offsets (e.g. construction defects)
- A structured settlement can be purchased in a taxable damage case but payments are taxable when received by the payee. In taxable cases, the structured settlement annuity issuer will issue a 1099 to the payee for the tax year such payments are made. The important takeaway when it comes to structured settlement taxation is that it is not the structured settlement annuity that governs the taxation it is the type of damages that the annuity payments represent.
Can anyone just buy a structured settlement annuity?
No, a structured settlement annuity can only be purchased by a defendant, an insurer, a qualified assignment company, or a non qualified assignment company. However anyone who receives payment of damages can benefit from a structured settlement annuity.
Can the court award a structured settlement annuity?
No, a court awards damages. If a structured settlement annuity is to be placed on a minor’s case and certain other types of cases, a judge’s approval may be necessary.
In New York, where judgements exceed certain threshold for future damages, portions of future danages are required to be structured as a judgement.
New York Civil Practice Law and Rules Law § 5031 Article 50-A (2022) – Periodic Payment of Judgments in Medical and Dental Malpractice Actions :: 2022 New York Laws :: US Codes and Statutes :: US Law :: Justia
What is the cost of a structured settlement annuity?
A licensed insurance agent or broker who is appointed or authorized by the annuity issuer to use its software may calculate the cost of the structured settlement annuity very easily, even at a mediation, in the courthouse, in a lawyer’s office, at the plaintiff’s home or in a coffee shop. Sometimes a daily rate is available that is better than the software generated rate.
Licensed insurance agents and brokers who are authorized by the annuity issuer may contact the annuity issuer after a plan has been decided to see if a better daily rate can be obtained.
Is a Structured Settlement Receivable an Annuity?
A structured settlement receuvable is not an annuity