Annuities and Funding Mechanisms Flashcards
6 cards from real Structured Settlements practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Annuities and Funding Mechanisms flashcards as text
What type of annuity is most commonly used to fund structured settlements?
Answer: Fixed annuity issued by a life insurance company
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.
Who owns the annuity contract in a typical structured settlement qualified assignment?
Answer: The qualified assignee
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.
What is the purpose of state insurance guaranty associations in the context of structured settlements?
Answer: To provide a safety net covering claimant payments if the issuing life insurer becomes insolvent
State life and health insurance guaranty associations protect claimants by covering periodic payments up to statutory limits if the issuing insurer becomes insolvent.
What is a 'rated age' in the context of structured settlement annuities?
Answer: An older age assigned to a claimant based on medical impairment, reducing the cost of the annuity
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.
What does 'cost of the annuity' represent in structured settlement negotiations?
Answer: The present-value premium the defendant or insurer pays to the life company to fund the payment stream
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.
What happens to the annuity funding a structured settlement if the claimant files for bankruptcy?
Answer: Future structured settlement payment rights are generally protected from creditors under federal bankruptcy law
Under 11 U.S.C. §522(d)(11)(D) and many state exemptions, the right to receive structured settlement payments is protected from creditors in bankruptcy.