Settlements 101.com -- Info Guide to Injury, Accident & Insurance Settlements

Structured Settlements FAQ

What do structured settlements consist of?
A structured settlement usually has 3 parts: 1) up-front cash for paying off immediate expenses such as lost wages or medical bills; 2) monthly payments to assist with routine recurring expenses; and 3) lump-sum payments for the payment of non-routine expenses that may occur.

What are "step" settlement annuities?
Step annuity payments increase in "steps" over the lifetime of the annuity to mirror the increase in the cost of living and to compensate for inflation.

How are payments made for a structured settlement?
Payments are often funded by an annuity that is purchased through a life insurance company. Since the settlement annuity is owned by the insurance company, it is important to inquire as to the financial stability and safety ratings of the insurance carrier.

Are structured settlement payments tax-free?
Yes, not only is the full amount of the settlement annuity tax free, but any earnings on the return on the annuity is not taxed either.

Can a structured settlement be used to obtain a loan?
No, since you are only the recipient of the settlement annuity and not the owner of the annuity, this is not allowed.