If you’ve suffered a personal injury and have resolved the situation with a settlement, you might decide to choose a structured settlement. Receiving your payments as an annuity rather than a lump sum can offer certain benefits, such as tax advantages and overall savings. When choosing this type of settlement, you might ask yourself how you can be sure that it’s a safe decision. Here are some of the reasons why choosing a structured settlement financing company is safe.
The recipient of the annuity is provided with a guarantee by the life insurance company that issues the annuity. This provides assurance that they will receive the entirety of the settlement as dictated by the agreement. Additionally, only companies that are of a certain standard are allowed to be involved in structured settlements. The companies are rated by independent rating agencies and must be highly rated to provide such a service. This provides further assurance that the company is trustworthy and will be able to pay out the entirety of the settlement.
Approval by the Department of Insurance
Depending on the state, the company providing the annuity might also need to be approved by that state’s department of insurance. This is the state’s way of protecting people that have come to an agreement, ensuring that they will receive the money they’ve agreed to or been awarded. The state’s department of insurance will look at the company’s assets to ensure it has the ability to pay out the settlement over a number of years. The company is also judged on how well they comply with the state’s regulations. These regulations have been established to protect those receiving settlements. If a company doesn’t have the appropriate assets or has not complied with the state’s regulations, they will not be able to be involved in structured settlements.
In addition to being approved by the department of insurance, many states require mandatory audits of companies that provide annuities for structured settlements. These annual audits ensure that the company providing the money for payments is able to do so. They also ensure that the company will be in good standing for the foreseeable future. This provides assurance that the payments won’t stop sometime in the relatively near future.
Some people would prefer a lump sum settlement to avoid the risk of not receiving the full settlement through an annuity. However, there are certain protections in place to ensure that a person that has chosen a structured settlement financing company will receive the full amount owed.