8-weeks-old Shepherd completely shut down and terrified, she would crawl into the floor if she could
Structured Settlements
Structured settlements payout over time as a stream of tax-free payments, rather than one lump sum. You can “cash in” your future structured settlement payments by selling them to a factoring company at a discount if you need immediate cash. Most structured settlements stem from personal injury, wrongful death or workers’ compensation lawsuits.
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ON THIS PAGE
What Is a Structured Settlement?
History of Structured Settlements in the U.S.
How Do Structured Settlements Work?
Payout Options for Structured Settlements
Structured Settlement Pros and Cons
Options for Annuity Owners to Sell Payments
FAQ
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Key Takeaways
Structured settlements are a stream of tax-free payments issued to an injured victim. The settlement payments are intended to pay for damages or injuries, providing financial security over time.
Structured settlement payments are guaranteed by the insurance company that issued the annuity. They do not fluctuate with market changes like stocks, bonds and mutual funds.
There are more pros than cons for choosing to receive a structured settlement over a lump sum. Spreading out payments over time can reduce temptation, but once the terms of a structured settlement are finalized, there's little you can do to renegotiate.
What Is a Structured Settlement?
Structured settlements are simple. Many civil lawsuits result in someone or some company paying money to another to right a wrong. Those responsible for the wrong may agree to the settlement on their own, or they may be forced to pay the money when they lose the case in court.
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A structured settlement is a regular stream of tax-free payments granted to the plaintiff in a civil lawsuit. Structured settlements are meant to provide long-term financial security to the injured party.
If the amount of money is small enough, the wronged party may have the option to receive a lump sum settlement. For larger sums, however, a structured settlement annuity may be arranged.
In this case, the at-fault party puts the money toward an annuity, which is a financial product that guarantees regular payments over time from an insurance company.
The agreement details the series of payments the person who was wronged will receive as compensation for the harm done to them. Spreading the money over a longer period of time offers a better future guarantee of financial security because a single payout can be spent quickly.
Juliette Fairley | 0:47
What is a structured settlement annuity?
What is a structured settlement annuity? - Featuring Juliette Fairley
Business and finance journalist Juliette Fairley defines a structured settlement annuity.
History of Structured Settlements in the U.S.
The U.S. has a rich history of structured settlements, but that wasn’t always true. Modern adoption of these payments can be traced back to Canada in the 1960s when a medication called thalidomide caused birth defects in thousands of children. Rather than receive a one-time payment from the at-fault pharmaceutical company, the claimants needed a series of payments over a longer timespan to cover future medical bills.
Structured settlements were first issued in the U.S. in the 1970s when similar cases arose. In that decade, the IRS Revenue Ruling 79-220 that was issued in 1979 provided tax benefits for the recipient, citing, “The taxpayer’s only right with respect to the amount invested was to receive the monthly payments, and the ruling concluded that the taxpayer did not have actual or constructive receipt or economic benefit of the amount invested.”
Settlement payments to the injured party did not count towards their gross income, and thus they were not required to pay taxes on any money received. Likewise, after the recipient passed away, payments to the estate continue to be excluded from taxation.
Structured settlements gained popularity in the 1980s after the U.S. Congress passed the Periodic Payment Settlement Act of 1982. The act served as the federal government’s buy-in with the IRS ruling and extended restrictions to the state governments, barring them from taxing structured settlement income from personal injury cases.
By 1985, the National Structured Settlements Trade Association formed to preserve and promote structured settlements to injury claimants through education and advocacy.
Over a decade later, the Small Business Job Protection Act of 1996 set limitations on the types of personal damage cases eligible to receive the tax benefits. As a result of this act, only damages from “personal physical injuries or physical sickness” can exclude payments from gross income. Payments from punitive damages were no longer eligible for tax exclusions.
Today, structured settlements remain a trusted source of financial security, with an estimated $10 billion annual payments issued to over 30,000 recipients. Now, it’s become commonplace for the claimants to choose a preference for periodic payments, a one-time lump-sum payout, or a blend of both.
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How Do Structured Settlements Work?
Legal settlements can be paid out in a one-time lump sum or through a structured settlement where periodic payments are made through a financial product known as an annuity. The key differences between these settlement options are in the areas of long-term financial security and taxes.
When a plaintiff receives a settlement through a one-time lump sum, they might spend it too quickly, robbing them of the long-term financial security that future payments could provide.
Moreover, any interest and dividends earned if the lump-sum were to be invested would be subject to taxes. Conversely, an annuity is meant to provide income throughout the recipient’s lifetime, and any interest and taxes earned through the annuity will grow tax-free.
Types of Structured Settlement Cases
There are a number of reasons why an individual may receive a structured settlement. The most common cases include:
The most common cases are:
Personal Injury
A personal injury case is a civil case where someone who’s been harmed files a lawsuit seeking money from the person believed responsible for the harm. Money in the form of a structured settlement helps recipients pay for medical expenses or other costs.
Workers’ Compensation
Most people know about workers’ compensation, which pays workers who get injured on the job while they recover. Payments can be used as wage replacement or to pay for medical treatment and other expenses during periods when injured employees are unable to work.
Medical Malpractice
In some unfortunate cases, doctors can do more harm than good. In this instance, injured patients or the families of deceased patients can sue for medical malpractice.
Wrongful Death
A structured settlement is also a common way to compensate family members who claim loved ones were victims of wrongful deaths. Families may be entitled to receive a stream of tax-free payments to replace income after a loved one’s death.
Structured settlements — or structured annuities — are both financial products and legal judgments. While they function somewhat like private assets, they are also subject to complex regulations.
Legal Structure: Assigned vs. Unassigned Cases
An assigned case is a qualified case, meaning the settlement proceeds qualify for tax benefits, and the defendant’s payment obligation must align with Internal Revenue Code provisions. In assigned cases, a third-party assignment company collects the funds from the defendant, and then purchases the annuity from a different insurance company. That annuity will fund the periodic payments directly to the claimant. The claimant, or plaintiff, does not control the annuity contract.
Conversely, in an unassigned case, the defendant is a property and casualty insurance company that purchases the annuity from a separate life insurance company. The defendant technically owns the annuity, and they name the injured party as the payee.
Learn about the process of being awarded a structured settlement annuity as well as the legal protections and advantages on the following pages:
Structured Settlement Payout Options
Compare and contrast the different ways to accept a cash settlement from a lawsuit.
Government Support for Structured Settlements
Learn about how the government uses the tax code to promote their use.
Structured Settlements for Minors
Read about why this type of settlement is typically used in cases involving children.
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Payout Options for Structured Settlements
If you elect to receive your lawsuit payout through a structured settlement, you can determine whether to begin to receive the funds immediately or at a later date. Immediate payments can be beneficial if you require medical care, for example, or have lost your source of income. You may decide to postpone the payments until a later time, such as after you retire. During the waiting period, the annuity will grow as it earns interest.
You can also determine whether the annuity should be paid for the rest of your life, no matter how long that may be, or for a specified number of years, as well as the schedule for receiving payments and the payment amounts and adjustments.
Often, plaintiffs will need money for a variety of expenses before they receive their settlement. If you find your expenses mounting as you await your first structured settlement payment or initial lump sum, you may want to consider pre-settlement funding options to tide you over.
Structured Settlement Pros and Cons
Structured annuities are ideally suited for many different types of cases. Although these scheduled payments offer several advantages, it is important to understand the benefits along with the risks when deciding on any financial investment.
Pros of Structured Settlements
Payments are tax-free.
In the event of the recipient’s death, the beneficiary can continue to receive tax-free payments.
Payments can be scheduled for almost any length of time and can begin immediately or be deferred for as many years as requested. They can include future lump-sum payouts or benefit increases.
Spreading out payments over time can reduce the temptation to make large, extravagant purchases and guarantees future income. This is especially helpful if the recipient has a medical condition that will require long-term care.
Unlike stocks, bonds and mutual funds, structured settlements do not fluctuate with market changes. Payments are guaranteed by the insurance company that issued the annuity.
A structured settlement often yields, in total, more than a lump-sum payout would because of the interest your annuity may earn over time.
Cons of Structured Settlements
Once terms are finalized, there’s little you can do to alter them if they do not meet your needs. You cannot renegotiate the terms if your financial situation or the overall economy changes.
Funds are not immediately accessible in case of an emergency, and the recipient cannot place a lump-sum payout in other investments that carry higher rates of return.
You can sell your payments if you need immediate cash, but these payments will be sold at a discount. This means the cash amount you receive from selling the payments will be less than the amount you would have ultimately received from future payments.
Not all states require insurance companies to disclose their costs to establish a structured settlement or lump-sum annuity. Without this information, a recipient could lose a significant amount of money through administrative fees.
Options for Annuity Owners to Sell Payments
You should carefully consider the terms of your annuity because they can’t be renegotiated after the contract has been issued. That can limit your options if your financial situation changes due to unemployment, illness or other setbacks.
However, annuity owners may have the option to get cash in advance of their contract schedules. Owners may sell some or all payments to structured settlement buyers. Some buyers may inaccurately refer to these sales as “structured settlement loans.” In reality, they are actually purchasing your settlement, which will effectively halt your regular payments. Such sales must be approved by a judge. The role of the judge is to decide if the sale is in the best interest of the annuity owner.
Other rules may apply depending on the details of your annuity contract and the laws of the state where you live. The Structured Settlement Protection Act of 2002 provides federal guidelines on such transactions.
Annuity owners should carefully consider their options before selling payments. You can learn more at Selling Structured Settlement Payments, and download our free step-by-step Guide to Selling Your Structured Settlement Payments.
We have no idea the details of her horrible past, but we can promise her the chance at a wonderful future. We don’t know what we are dealing with health wise because she is so terrified nobody wanted to inflict additional stress.
Rescue/foster needed ASAP
Just came into the leggett Texas pens there just babies so scared
Approx 2 months old
We only have 2 fans so these babies are hot we have no ac they only get an hour of attention a day that’s it
She is VERY shut down and will need a lot of work so a patient quiet home is probably best. If you or someone you know is interested in giving her the forever family she rightfully deserves, please contact the shelter before they put her down.
Top 10 health insurance companies in the US
In the US, there are a host of private healthcare insurance specialists. However, life/annuity and property/casualty insurers also write this coverage, often referred to as accident and health insurance, as outlined by the Insurance Information Institute.
In 2018, the accident and health insurance industry’s direct written premiums reached $1.1 trillion, up by 57.3% from 2009. The largest 10 insurers collectively wrote 51.8% of the total US market, according to the National Association of Insurance Commissioners (NAIC).
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Based on NAIC’s 2018 data, here are the top 10 accident and health insurance groups:
1. UnitedHealth
Direct Written Premiums: $156.9 billion
Market Share: 14.2%
A diversified health and well-being company, UnitedHealth Group’s core capabilities are clinical expertise, advanced technology, and data and health information.
UnitedHealth Group serves clients and consumers in the US and more than 130 other countries through two distinct platforms: UnitedHealthcare provides healthcare coverage and benefits services, while Optum provides information and technology-enabled health services. The group invests more than $3.5 billion in technology and innovation and processes approximately 1.1 trillion transactions annually.
2. Kaiser Foundation
Direct Written Premiums: $93.2 billion
Market Share: 8.5%
Kaiser Foundation Health Plan, Inc. operates as a non-profit healthcare organization. The organization offers allergy, audiology, cardiology, dermatology, oncology, hospice, laboratory, nephrology, occupational therapy, pain management, pediatric rehabilitation, and pharmacy services. The company serves patients in the US.
3. Anthem, Inc.
Direct Written Premiums: $67.2 billion
Market Share: 6.1%
Anthem, Inc. is a health benefits company that is committed to improving lives and communities and making healthcare simpler. Anthem, through its affiliated companies, serves more than 78 million people, including over 41 million within its family of health plans. It aims to be the most innovative, valuable, and inclusive partner.
The group’s affiliated health plans have created various HMOs, PPOs, network-based dental products, various hybrid and specialty products, and health plan services that combine the attributes consumers find attractive with effective cost control techniques. Individual members and employer groups can select from basic and comprehensive plans to meet their specific needs. A wide range of related specialty products and other services is also available, including flexible spending accounts and COBRA administration.
4. Humana
Direct Written Premiums: $56 billion
Market Share: 5.1%
Humana’s cultural foundation is aligned to helping members achieve their best health by providing personalized, simplified, whole-person healthcare experiences. Recognizing that each person, family, and community’s healthcare needs continue to evolve, Humana creates innovative solutions and resources to help people live their healthiest lives on their terms – when and where they need it.
5. CVS
Direct Written Premiums: $55.4 billion
Market Share: 5.0%
CVS Health is a healthcare innovation company with a purpose to help people on their path to better health. Through its health services, plans, and community pharmacists, it pioneers a new approach to total health.
CVS has more than 9,800 retail locations, nearly 1,100 walk-in medical clinics, a pharmacy benefits manager with about 93 million plan members, a diversified healthcare benefits company serving about 22.2 million medical members, a dedicated senior pharmacy care business serving more than one million patients per year, expanding specialty pharmacy services, and a standalone Medicare Part D prescription drug plan.
6. HCSC
Direct Written Premiums: $36.9 billion
Market Share: 3.4%
Health Care Service Corporation (HCSC), a mutual legal reserve company, is the largest customer-owned healthcare insurance company in the US. The company serves more than 16 million members across five states – Illinois, Montana, New Mexico, Oklahoma, and Texas – and employs more than 23,000 people in over 60 local offices.
HCSC offers a wide variety of life and health insurance products and related services through its affiliates and subsidiaries, including Dearborn Group, Dental Network of America, HCSC Insurance Service Company, Medecision, Availity, Prime Therapeutics, and TriWest Healthcare Alliance.
7. Centene Corp
Direct Written Premiums: $36.3 billion
Market Share: 3.3%
Centene Corporation, a Fortune 500 company, is a diversified, multinational healthcare company providing a portfolio of services to government-sponsored healthcare programs, focusing on uninsured and underinsured individuals. It operates in 32 states and three international markets and has more than 15 million managed care members.
Centene operates local health plans and provides a range of health insurance solutions. Also, it contracts with other healthcare and commercial organizations to offer specialty services, ranging from behavioral health, dental benefits, life and health, and pharmacy benefits management to care management software, correctional healthcare services, in-home health services, managed vision, specialty pharmacy, and telehealth services.
8. Cigna Health
Direct Written Premiums: $29.3 billion
Market Share: 2.7%
Cigna Corporation is a global health service organization with more than 165 million customer and patient relationships in over 30 countries and jurisdictions. Its insurance plans and products include healthcare insurance for individuals and families, dental insurance plans, Medicare plans, Medicare supplemental plans, other supplemental insurance, and international health insurance.
9. WellCare
Direct Written Premiums: $20.5 billion
Market Share: 1.9%
WellCare Health Plans, Inc. focuses on delivering government-sponsored managed care services to individuals, families, children, and seniors with complex medical needs primarily through Medicaid, Medicare Advantage and prescription drug plans, as well as individuals in the health insurance marketplace. WellCare serves about 6.4 million members nationwide as of Sept. 30, 2019.
10. Molina Healthcare, Inc.
Direct Written Premiums: $18.5 billion
Market Share: 1.7%
Molina Healthcare, a Fortune 500 company, exclusively focuses on government-sponsored healthcare programs for qualified individuals and families. The company contracts with state governments and serves as a health plan providing a wide range of quality healthcare services to individuals and families.
Molina provides health plans in California, Florida, Illinois, Michigan, New Mexico, New York, Ohio, South Carolina, Texas, Utah, Washington, Wisconsin, and Puerto Rico. The company also offers a Medicare product and has been selected in many states to join in dual demonstration projects to manage the care for those eligible for Medicaid and Medicare.