Structured Settlements Annuities and Funding Mechanisms

Question 1

What type of annuity is most commonly used to fund structured settlements?

Accepted Answer

Fixed annuity issued by a life insurance company

Answer

Fixed annuities issued by highly rated life insurance companies are the standard funding vehicle because they guarantee the exact payment amounts specified in the settlement.

Question 2

Who owns the annuity contract in a typical structured settlement qualified assignment?

Accepted Answer

The qualified assignee

Answer

In a qualified assignment, the qualified assignee owns the annuity contract and is both the owner and annuitant-beneficiary controller, while the claimant is simply the payee.

Question 3

What is the purpose of state insurance guaranty associations in the context of structured settlements?

Accepted Answer

To provide a safety net covering claimant payments if the issuing life insurer becomes insolvent

Answer

State life and health insurance guaranty associations protect claimants by covering periodic payments up to statutory limits if the issuing insurer becomes insolvent.

Question 4

What is a 'rated age' in the context of structured settlement annuities?

Accepted Answer

An older age assigned to a claimant based on medical impairment, reducing the cost of the annuity

Answer

A rated age is an actuarially assigned older age given to an impaired claimant, reflecting shorter life expectancy and lowering the annuity premium needed to fund a given payment stream.

Question 5

What does 'cost of the annuity' represent in structured settlement negotiations?

Accepted Answer

The present-value premium the defendant or insurer pays to the life company to fund the payment stream

Answer

The annuity cost is the one-time premium paid to the life insurance company to purchase the annuity contract that will fund all future periodic payments.

Structured Settlements Practice Test

Structured Settlements Practice Test

Structured Settlements Annuities and Funding Mechanisms