In the world today, at some point in life people are faced with uncertainties that cripple down them financially. It is for this reason that structured settlements exist, since they are a financial or insurance plan that help persons get a sum of money on a periodic basis. Most of them are used for settlement of tort claims.
Common types of structured settlements
To begin with, annual payments are used in large settlements where the sum of money payable is divided and spread over given number of years. Monthly indexed payments are paid in installments indexed over a given time usually months. Another type is contingency or futuristic care of the claimant. This is used to cater for expenses such as medical and housing that are recurrent.
When to take structured settlements
Different circumstances force different individuals to take up structured settlements. A good example is persons that are prematurely disabled through accidents. Such accidents may have resulted from negligence hence the need to cater for ongoing medical costs. Another class of persons is minors who are incapable of handling their own finances. There are uncertainties that lie in the future hence a person may need to secure finances to settle contingencies such as housing expenses, school fees and other huge obligations requiring money, for example investing in shares .
Benefits of structured settlements
First, this type of insurance provides a sense of security in case one exhausts their fund reserves. Secondly, it offers flexibility as different payment designs offered cater for a wide range of expenses such as medicine, housing and college fees. Thirdly, beneficiaries’ future existence is guaranteed in that, in case the claimant dies prematurely, they are guaranteed of getting the remaining annuities. Lastly, benefits are maximized in that; a surety is created in terms of payment irrespective of the lifespan of the claimant.
Disadvantages of structured settlements
Depending on the type of injury, the structured securities also vary in sizes. Sometimes, a claimant may have a small settlement that is not attractive therefore unable to cater for expensive medical expenses. This therefore prompts them to dispose such securities to a third party firm.
In addition to this, the value a security is redeemed for is usually little compared to its cost. Let us not forget, the process of transferring the security to the third [party firm is usually costly and tiresome since legal processes such as going through a court system.