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Difference between structured settlement vs annuity

The difference between structured settlement vs annuity is the way the money is earned and the payment structure.

Difference between structured settlement vs annuity

If you're involved in a personal injury claim, it's a good idea to understand the basics if it comes up in your case.

This is the difference between structured settlement vs annuity

Structured settlement: is a lump sum payment that is paid in agreed installments after the court process. Often used in personal injury law, it is often the result of a payment being settled before going to court. In some cases, it can also be the result of a missing case.

This is the compensation paid to correct a mistake when one person causes harm to another. 

Both the defendant and the plaintiff will agree on terms such as when payments are made, how often payments are made (often monthly or annually), and the amount.

While annuities are: periodic payments and are financial vehicles used by life insurance companies and investment companies. An annuity is an insurance contract that provides a stream of income for a specified period or lifetime of a person. his is a contract between the annuity buyer and the insurance company.

Read also : Importance of financial management in modern business

Structured settlements are legal tools and annuities are financial tools. There is some flexibility in how structured settlements can be arranged to make payments but annuities are generally predetermined.

How they are funded usually also differs. A structured settlement is a payment made from one person to another as compensation and annuities are often funded by the person who will also receive the payment.

The structured settlement can be sold if you decide at a later date that you want a lump sum. Generally, the insurance company can buy it from you and the buyer will start receiving payments. The insurance company will pay you all at once at a rate deducted from the total payment.

Structured settlements can be set up as annuities but not all annuities are structured settlements. Structured settlements can work well in cases involving small children or when there is a large amount of money to be paid.

There are implications for income taxes, accrued interest, and administrative costs so you need the advice of a financial professional as the details can get very complicated.

While you should seek advice from a financial professional for your finances, it is also important to have a lawyer who understands which financial tools may be used in a settlement or ordered by a court.

Thus the discussion about Structured Settlement vs Anuity, hopefully it can help.