2) periodic payments through a structured settlement annuity or 3) a combination of cash and structured payments.
While years past, personal injury settlements always involved lump-sum payouts. While the payout was tax-free, the money earned from the settlement was taxable unless invested in tax-free municipal bonds.
Clients choosing cash settlements assume the risks associated with their investments during the stable and volatile economic times. Clients requiring lifetime care and support usually do not have the luxury of being able to weather market ups and downs and fluctuating incomes, especially when unforeseen medical emergencies are part of life. Managing the lump sum to last possibly for a lifetime is also a concern.
To reduce the risks associated with lump sum payouts, the Internal Revenue Service available for defenders to purchase insurance annuities to fund settlements to injured parties with all proceeds from the annuities tax-free.
Using annuities, injured parties received guaranteed tax-free income benefits issued by an A or A + -rated life insurance company. Clients can decide to receive 100 percent of the funds through structured settlement annuity or a combination of an annuity with a cash component for immediate or emergency situations.
Settlement Safeguards
That is why only highly rated life insurance carriers are used.
Investments are generally high-quality investment grade fixed income securities. Structured settlement annuities enjoy competitive results compared to other conservative investments in addition to their tax-free status.
In California, companies offering structured settlements must be first approved by the California Department of Insurance. The department evaluates the insurance carrier & # 39; s solvency and whether the carrier complies with California regulations. Carriers are also subject to mandatory annual audits and other financial compliance requirements.
Reserve adequacy is mandatory and is regularly monitored by state legislators and is regression, all annuity reserves must have assets that are equal to or exceeding the corresponding payment obligations. These general accounts support only the obligations of the insurance companies - and not the obligations of a parent company or other affiliates.
In other words, parent companies are preempted from raiding capital from their profitable, well-capitalized life insurance company subsidiaries.
With structured settlements, personal injury agents have their own underlying assertion that their underlying assurance will be confinedly insure clients that these assets will continue continue to produce immediate and long- term needs.
