Structured Settlements


A contract of insurance, which provides for periodic payments on a regular basis during the lifetime of a particular person, or for a fixed period such as 20, 30, or 40 years.
Deferred Annuity
An annuity with a payment start date that is several years in the future.
Impaired Annuity
An annuity, where the Life Insurance Company has acknowledged the possibility of a shorter than average life expectancy for the measuring life. This would happen because of negative factors pertaining to the medical condition of the measuring life. This allowance results in a higher rate of return because of the shorter anticipated payment period. Despite any impairment rating, the annuity will continue to pay as long as the person remains alive.
Indexed Annuity
An annuity with payments that are increased every year. Increases may be at fixed amounts such as 2% per year up to 8% per year, or tied to the Consumer Price Index: The purpose of indexing is to provide protection against inflation and rising costs.
Term Certain Annuity
A fixed number of periodic payments that are made to the claimant or his inheritors. For example an annuity that provides for a 10-year term or 120 monthly payments. At the end of the term the payments cease.
Life Annuity
An annuity that stipulates payments will cease upon death of the measuring life.
Joint and Last Survivor Life Annuity
An annuity with payments that continue until the death of the latter of two measuring lives.
Single Premium Annuity
An annuity with the purchase price fully paid at the beginning of the contract.
In a Structured Settlement, the annuitant ( Defendant Insurance Company ) irrevocably directs that the payments they are entitled to receive, will be made directly to the "Payee" ( Injured person )
The party entitled to receive the annuity payments and income tax notices after the death of the measuring life. In a Structured Settlement, the beneficiary irrevocably directs that the payments they are entitled to receive be paid directly to the "Secondary Payee(s)" who have been named by the injured person ( usually their family members )
Assignments and Assignment Fees
Canada Customs and Revenue Agency (formerly Revenue Canada) has approved Casualty Insurers transferring the ownership of the annuity and the obligations of the defendant insurance company including the guarantee of the payments and the administrative expenses to a third party insurance company that takes over or "assumes" all the obligations and responsibilities. This must be done at the time of settlement with all the parties consenting.

Such an assignment will not jeopardize the tax-free status of the payments if properly executed.

Assignment fees are $2000 per case and must be paid by one of the parties.
Concurrent Guarantee
It is possible to `split` the guaranteed payments between the Defendant Insurance Company and the injured person`s family with all parties` consent. This may be a share such as 50, 50 % each, or divided by years such as first 10 guaranteed years to the Defendant Insurance Company and the next 15 guaranteed years to the family of the injured person.
Guarantee Period
A life annuity where a certain period, for example 20 years, is guaranteed to be paid, notwithstanding the death of the "measuring life" prior to the end of this period. The guarantee is used to provide the on-going payments to the family or the estate of the injured party for the balance of the guarantee period.
Lump Sum Payment
There are two occasions where this term is used. A single payment in final settlement of damages. The payment is paid out tax-free. All income from investment of the money thereafter is taxable. Payments from an annuity, on a specific date or dates in the future, usually incorporated into a plan to deal with foreseeable requirements such as education or vehicle replacements.
Life Expectancy
The average duration of the life remaining of a number of persons of a given age according to a mortality table. The life insurance companies create tables according to their own experience, research and actuarial research.
Measuring Life
The person who must be alive to cause life annuity payments to continue. Upon the death of the named measuring life the payments stop unless a guarantee period has been put into place.
Mortality Tables
A listing of mortality experience of groups of individuals by age, sex and other factors. A mortality table permits an actuary to calculate how long a person of a given age may on average be expected to live. The major life insurance companies construct mortality tables from their own experience.
Non-Assignable and Non-Transferable
Two mandatory conditions that apply to all structure annuities. Neither the annuity nor any proceeds may be transferred, pledged, secured, or assigned by the owner.
A mandatory condition in all structure annuities. This condition prevents any party from collapsing (cashing out) the annuity for a present value or lump sum payout.
The purchaser of the annuity (usually the Property & Casualty Insurance Company that is funding the structured settlement)
The party irrevocably designated to receive the annuity payments while the "measuring life" remains alive.
Secondary Payee
The party designated to receive any guaranteed annuity payments after the death of the "measuring life".
Reversion Clause
CAUTION: If this clause is inserted it means that upon the death of the measuring life, any remaining guaranteed payments are re-directed to the original Defendant Insurance Company.
When a Life Insurance Company reviews medical reports of a measuring life and ascertains that there are life-shortening factors. The rate-up is the a number of years which are added to the actual age of the measuring life when pricing a lifetime annuity.