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Understanding the Basics of Annuities

Of all insurance policies a person should consider in today’s society, the annuity is important, especially for the elderly. People living in the United States find that annuity policies are actually lucrative. Although this type of policy could be sold at different ages, the best time to buy is when an individual reaches age 55 and up. In fact, this policy is a tool that provides peace of mind and a secure future.

Simply put, a structured settlement annuity is a type of plan whereby the obligation of payment is deferred. As with any policy, the annuity comes with advantages and disadvantages that need to be understood. What happens is that if there were a personal injury lawsuit or some type of product liability issue, the annuity settlement would provide protection. With this, the buyer could make payments over several years. Of course, the type of plan chosen would depend on a variety of factors.

With a structured settlement annuity, payments are generated because of a personal injury tort claim with money coming directly from the insurance or financial company. These payments are scheduled from some type of personal injury tort claim. These annuities come directly from an insurance or financial company in the form of scheduled payments. For years, people would be paid money in a lump sum but starting in the 1970s both the United States and Canada adopted a different policy whereby payments would be paid periodically.

Over the years, other countries have started using the periodic payout along with North America to include England and Australia. People need to remember that no matter the country, the concept of annuities is the same. However, each country has its own processes, meaning the payout schedule might vary somewhat. Some countries have income requirements associated with the annuity payment while others do not.

For the individual that has been awarded structured settlement annuities, he or she automatically becomes the seller. This means the award received could be converted into cash, again paid out in periodic payments. However, for this to occur, the person would first need to sell the annuities. To get help with this, the insurance or financial company could answer questions and provide guidance through the entire process. That way, the seller of the annuity gets the best deal possible.

The companies that buy annuity settlements typically provide more than one plan. Although payments are generally paid monthly, quarterly, or annually, these companies often provide other options such as partial payment, shared payment, full payment, or even deferred plans. Of course, when selling settlement annuities, the individual would be required to sign an official contract and in some instances, to buy or sell would require a court hearing.

Structured settlement annuities offer a number of benefits. As an example, an annuity is a type of long-term income that is often tax-free. However, for the seller of the annuity to get the tax break, he or she would never be able to ask for a payment increase or a cash advance on the settlement. However, if the seller can find someone to buy the annuity settlement, the payments received could be sold for cash, meaning the seller has the option of getting a lump sum rather than periodic payments.

The bottom line is that structured settlement annuities come from an injured person settling a tort suit with the defendant, which may or may not also include the insurance carrier. In return for the settlement annuity, the injured person agrees to dismiss the lawsuit in exchange for money in the form of period payments that are received over the period of several years.

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