Though the basic premise and reasoning for purchasing all is the same, there are a number of annuity settlement options that can be chosen for the distribution of annuity payments. A structured settlement annuity is a financial or insurance arrangement whereby a claimant agrees to resolve a personal injury tort claim by receiving periodic payments on an agreed schedule rather than as a lump sum. The most common are listed here:
* Life Annuity – No Refund
The life annuity is a general payout category in which the payout is guaranteed for life. Sometimes known as a straight life annuity, this Annuity Settlement Option pays a benefit for as long as the annuitant lives, and then it ends. Whether the annuitant lives past 100 years of age or dies one month after the annuity period starts, the annuity payments will continue only until he or she dies. In other words, there is no guarantee as to the minimum amount of benefits under a life annuity.
* Refund Life Annuity
The length of time for which income payments will be made to the annuitant under a refund life annuity contract is the same as that for a straight life annuity. Thus, with this option the annuitant will receive payments for as long as he or she lives.
* Life Annuity Certain
Another type of Structured Settlement Annuity is the life annuity with period certain, which guarantees payments for a certain minimum number of years – typically 10, 15, or 20. Obviously, the annuitant could outlive the minimum number of years specified in the contract, in which case the income payments continue until his or her decease.
* Joint Life Annuities and Joint Life and Survivorship
With a joint life and survivorship (or last survivor) annuity, there are more than one (usually two) annuitants, and both receive payments until one of them dies. A stated monthly amount is paid to the annuitant and upon the annuitant’s death, the same or a lesser amount is paid for the lifetime of the survivor.
* Temporary Annuity Certain
As previously stated, under a life annuity with period certain, if the annuitant lives longer than the “certain” period stated in the contract, income payments continue for the lifetime of the annuitant. However, this is not the case with a temporary annuity certain. If the insured outlives the period of payments stipulated in the temporary annuity certain contract, payments stop at the end of the period.
* Deferred Annuity Death Benefits
In the case of a deferred annuity contract, the annuitant could die before receiving even one income payment under the contract – perhaps several years before the first income payment fell due. Although individual company policies can vary greatly as to what amount will be paid to the annuitant’s beneficiary or other heirs, most companies refund at least the amount that the purchaser has paid for the contract up to that point.
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