Structured Settlements

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A structured settlement is defined as an insurance or financial agreement inclusive periodic payment, which an applicant accepts to cover a personal injury risk claim or to compromise a legislative payment responsibility. It also called as “periodic payments” and sometimes defined as a “periodic payment judgment” when it integrated into a trial judgment. Some structured settlements probably will include income tax and wastrel requirements as well as benefits.

Structured settlements were initially started in United States and Canada during the 1970s era as a substitute to the lump sum settlement agreement. As for now, structured settlements become an important part in common law for countries like Australia, England, Canada and United States too. However, it has different definitions, rules and standards for each of these countries to suits their own local law enforcement practices but they still have a major similarity in structure generally.

The Process of Claiming Structured Settlement

Generally, there are two cases involved in the process to claims a structured settlement, which are “assigned case” and “unassigned case” where the detail process are as follows:

1)    Assigned case of structured settlement:
In an assigned case, the property or casualty company does not want to keep the long-term periodic payment responsibility on its books. Hence, the property or casualty insurer relocates the responsibility, through a legal mechanism called a qualified assignment, to a third party. The third party, called an assignment company, will need the property or casualty company to pay it an amount adequate to enable it to purchase an annuity that will fund its newly established periodic payment obligation. If the claimant approvals to the relocate of the periodic payment obligation (either in the settlement agreement or, failing that, in a special form of qualified assignment known as a qualified assignment and release), the defendant and/or its property or casualty company has no further liability to make the periodic payments. This method of replacing the obligor is desirable for property or casualty companies that do not want to keep the periodic payment obligation on their books. Usually, an assignment company is an affiliate of the life insurance company from which the annuity is purchased.

2)    Unassigned case of structured settlement:
However in an unassigned case, the property or casualty insurer will keeps the periodic payment obligation and funds it by purchasing an annuity from a life insurance company, thus counterbalancing its obligation with a corresponding asset. The payment flow purchased under the annuity matches precisely, in timing and quantity, the periodic payments agreed to in the settlement agreement. The property or casualty company possesses the annuity and names the claimant as the payee under the annuity, thus directing the annuity issuer to send payments directly to the claimant. If any of the periodic payments are life-reliant (i.e., the obligation to make a payment is reliant on someone continuing to be alive), then the claimant (or whoever is determined to be the measuring life) is named as the annuitant or measuring life under the annuity.

As a conclusion, the major difference of “assigned and unassigned structured settlement” is, obviously whether the insurer company wants to keep the periodic payment responsibility/obligation or not and honestly speaking, this consideration would be based on profitability matter of course.

Finally, I hope this article could help you to understand what is so called structured settlement all about and indirectly will be able to assist you to make a better decision before getting into it. See you around… Cheers.

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