How to Read a Structured Settlement Annuity Agreement

A structured settlement annuity is an annuity that was generated as part of a structured settlement agreement. An annuity is a legal guarantee that an insurance company will pay you a certain amount of money on a regular basis during a certain period. A structured settlement agreement is a legal agreement that indicates that you are entitled to receive a certain amount of  money because you suffered a personal injury. A structured settlement annuity makes it easier for the insurance company to pay that money by spreading it over a longer period. Structured settlement annuity agreements differ on case-by-case bases, but they should all contain the following.

Value of the Annuity Payments

The structured settlement annuity agreement must clearly state how much you will be paid. This depends on the nature and the extent of your injury. Normally, this includes your medical and living expenses. If the injury is severe enough to make you unable to work, those payments will include enough money to cover your rental or mortgage payments, utilities and the purchase of food and clothing. You will need to make sure that the payments are large enough to cover those expenses for the designated period. If possible, try to make sure that the number is slightly higher than the total expenses--that way, you will have something to fall back on if some emergency forces you to spend more money than you anticipate.

Duration of the Annuity Payments

Another important aspect of your structured settlement annuity agreement is the duration of the annuity payments--how long the annuity payments will be made. This also depends on the extent of your injury. If the injury is temporary, the annuity payments should last for as long as it could take you to recover. But if the injury is severe enough to be permanently debilitating and/or require life-long medical care, the annuity payments should be extended until the day of your death.

In some cases, you may be able to recover from your injury enough to be able to go back to work but not quite enough to end your reliance on some form of medical care. If that's the case, you should make sure that the duration of your payments is structured accordingly.

Frequency of the Annuity Payments

The structured settlement annuity agreement must clearly state the date when the annuity payments are scheduled to begin and how often they will be made during the course of each calendar year. Annuity payments are usually made on a monthly basis, but some insurance companies may opt for longer periods. Make sure that annuity payments are frequent enough to cover your expenses without going over their value.

Who Receives Annuity Payments

This is the more obscure but nonetheless important aspect of your structured settlement annuity agreement. If you want your dependents (or your family in general) to receive your annuity payments after you die, you may want to consider making sure that the agreement states that the annuity payments go to your estate. However, you should be aware that, if you do this, the annuity payments will no longer be tax-free and you (and later your beneficiaries) will have to pay taxes on them. This is something that you must decide for yourself based on the needs of your family.

Miscellaneous Formalities

Finally, you should make sure that the structured settlement annuity agreement includes your name, address and contact information as well as the name and address of the insurance company. Depending on how the payments are made, you may also need to include your bank account information. You must also make sure that everything is spelled correctly--otherwise, your annuity payments may face delays.

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