Annuity Payments in Auto Collision Structured Settlements

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What Is a Structured Settlement and How Does It Apply to an Auto Accident Claim?

At times, a lawsuit is necessary to obtain damages in an auto accident claim, but in some instances the dispute may be resolved through a pre-trial settlement. A settlement is where the parties involved in an accident sit down with each other and their insurance representatives in order to reach a desired agreement with regards to monetary payments. Specifically, the monetary payments may take the form of a structured settlement wherein the defendant agrees to render payments to the plaintiff in periodic installments, such as monthly payments. 

This is in contrast to a lump sum payment, where the plaintiff receives money all at once in a single payment. Structured settlements may be useful when the auto accident settlement involves an unusually large sum of money. 

Are Annuity Payments Available in an Auto Accident Settlement?

Yes. An annuity payment simply refers to the method by which the defendant’s insurance company obtains funds to make the settlement payment to the plaintiff. The way it generally works is that an annuity company sells an annuity payment package to the defendant’s insurance provider. 

The annuity company will then disperse the plaintiff’s settlement proceeds in monthly payments. The annuity company usually charges a fee or annuity rate in order to make a profit on the transaction. An annuity is basically a contract ensuring that there are sufficient funds to pay the plaintiff’s settlement award. In auto collision cases, annuities may be a necessity if a large amount of money is involved.

Pros and Cons of Structured Settlements and Annuities vs. a Lump Sum Payment

In settlements involving a very small monetary award, a structured settlement will usually not be necessary. However, in more serious cases (for example those involving the loss of life or severe damages) structured settlements are an option. Advantages and disadvantages of structured settlements are:

Pros:

Cons:

Do I need a Lawyer to assist Me with a Structured Settlement Payment?

As a plaintiff, you will need to make an informed decision as to the form of payment. Many of the drawbacks associated with structured settlements can be alleviated if the you have employed the services of a professional such as a financial advisor or a lawyer to help them manage their payments.

The laws governing annuities can be very complicated and can vary from state to state. Since most settlements already require the presence a lawyer, he or she should advise you in deciding on the form of settlement payment. You should approach a settlement award much as would any significant financial increase - prudent measures are often beneficial in the long run.

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Last Modified: 12-15-2014 04:57 PM PST

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