glossary

Annuitant – The person entitled to receive annuity payments or who now receives them.

Annuity – The contract between the owner and the life insurance company to provide payments to claimants.

Annuity Certain – Annuity designed to make payments for guaranteed period of time. Payments may be made periodically such as weekly, monthly or annually. Payments may also be made immediately or deferred, i.e. to start 01/01/2025, $1,000 per month for 10 years certain. Also known as period certain.

Annuity with Compounding Benefits – Annuity that increases at a fixed percentage computed on previous year’s payments. Frequently expressed as an addition to an annuity, i.e. with 3% compounding annually.

Assignee – A person or entity to whom legal liability is transferred for an obligation.

Beneficiary -A named person (heir), a person(s), estate, or financial instrument (for example, a trust fund), named in the policy as the recipient of the guaranteed payments in the event of the policyholders death. Also known as contingent payee.

Benefit – An amount payable from an annuity by the insurance company or the self-insured entity to a claimant or beneficiary.

Cash Refund – Lifetime annuity with guaranteed benefit equal to the premium amount. Commonly used for Workers’ Compensation cases. Beneficiary can be the casualty company/defendant. The balance of the premium (after all payments are made) is deducted and returned to the casualty company in a cash lump sum.

Certain and Life Annuity – Annuity designed to make payments for the life of the annuitant with specific number of years guaranteed, regardless of life or death. Payments may be made periodically such as monthly or annually. Payments may also be made immediately or deferred, i.e. beginning on a birthdate or to start a new year, $2000 per month for 15 years certain and life.

Claim – A claim is a demand by a person or entity that is seeking to recover for a loss. A claim may be made against an individual or an entity. A claim may also be made against an insurance company, when an insured asks the insurance company to pay for a loss that may be covered by an insurance policy.

Claimant – A person(s) who asserts a demand seeking to recover for a loss and who is the recipient of the structured settlement.

Constructive Receipt – Per the Internal Revenue Code, money representing income not actually received or in the possession of the taxpayer may be considered received as income and therefore taxable. Constructive receipt is said to have occurred if that income is credited to the taxpayer without a restriction on the taxpayer’s right to bring that income within his control.

Contingent Payee – The person(s), estate, or financial instrument (for example, a trust fund), named in the policy as the recipient of the guaranteed payment in the event of the policyholder’s death. Also known as beneficiary.

Deferred Annuity – Annuity in which payments begin at a stated time in the future.

Education Fund – Funds paid over a specific period, usually starting at age 18 and continuing through typical educational or vocational training years.

Employment Claim – Examples of employment claims might be related to wrongful termination, sexual harassment, wrongful discipline, failure to employ or promote, or discrimination.

First Payment Date – Date payments begin for the entire settlement or for the annuity chosen.

General Liability – For the most part, claims for injuries or damage caused by ownership of property, manufacturing operations, contracting operations, sale or distribution of products, and the operation of machinery, as well as professional services.

Guaranteed Benefit – Payments made regardless of whether the annuitant is living or deceased.

Injured Party – A person (or persons) who is the recipient of the legal action and receives the benefit of the resulting structured settlement.

Installment Refund – Lifetime annuity with guaranteed benefit equal to the premium amount. Commonly used for Workers’ Compensation cases. Beneficiary is typically the casualty company and payments are made in installments as designated in the annuity.

Joint and Survivor Lifetime Annuity – An annuity designed to provide payments for two annuitants whether living or deceased. May be a guaranteed period and the percent of payment received upon the death of one annuitant may vary. Payments may be periodically, immediately or deferred, i.e. beginning 07/10/2010, $3000 per month for 15 years certain and life, 100% joint and survivor).

Last Guaranteed Payment Date – Date when final guaranteed annuity payment is made for a lifetime annuity with a period certain.

Last Payment Date – Date when final annuity payment will be made for a certain only annuity.

Life Insurance Company – A company that provides the annuity policy, i.e. AIG American General Life, Hartford Life, New York Life. Also known as annuity issuer.

Life Only Annuity – Annuity with payments that continue only during the life of the annuitant. There is no other guarantee and payments cease at death.

Lifetime Annuity – An annuity designed to make payments for the life of the annuitant only. Payments may be made periodically such as monthly or annually. Payments may also be immediately or deferred, i.e. to start 01/01/2025, $1500 per month for life.

Lump Sum Annuity – Annuity designed to make a single payment on a specific date.

Medical Malpractice – A term used to describe claims resulting from improper medical care or treatment resulting in a significant deterioration of a person’s health status caused by a medical practitioner (such as a doctor, hospital, or other medical provider) who did not follow generally recognized medical practice standards.

Medical Trust – Trust account from which medical expenses are paid for the annuitant.

Normal Life Expectancy – Age to which a person is expected to live from their present age. Figure is based on statistics gathered by the life insurance companies.

Period Certain – Annuity designed to make payments for guaranteed period of time. Payments may be made periodically such as monthly or annually. Payments may also be made immediately or deferred, i.e. to start 01/01/2025, $1,500 per month for 10 years certain. Also known as period certain.

Periodic Payment Act of 1982 – Also known as Public Law 97-473. Various tax rulings were brought into statutory certainty and added Section 130 to the Internal Revenue Code that authorized qualified assignments.

Personal Injury – An injury to a person’s body or mind. An injury to a person’s body is considered a physical injury. Examples are: a sickness resulting from an injury, loss of limb, a dog bite, or one’s life. A personal injury of the mind might be such as defamation of character or wrongful termination.

Plaintiff – A person or entity that brings a legal action against another party and that is seeking some kind of legal remedy to the situation from the accused party (defendant).

Premium – Total cost of the annuity portion of the settlement.

Proposal – Structured settlement package presented to the client as a suggested solution for settlement.

Qualified Assignment – The term means any legal transfer of a liability to make periodic payments as damages on account of personal injury or sickness in a case involving physical injury or physical sickness if a) the transferee assumes the liability from a person who is a party to the suit or agreement; b) the periodic payments are fixed and determinable regarding amount and time of payment; c) the periodic payments cannot be accelerated, deferred, increased, or decreased by the recipient of such payments; d) the assignee’s obligation is no greater than the obligation of the person who assigned the liability; and e) the periodic payments tax-free to the recipient under section 104(a)(2).

Qualified Funding Asset – Annuity or U.S. government obligation purchased in accordance with Section 130 of the Internal Revenue Code.

Quote – Price given by a life insurance company for specific annuitant and benefit package. Section 104(a)(1) – Part of the Internal Revenue Service Code that allows monetary amounts received under workers’ compensation claims to be excluded from the gross income amount on a person’s tax filing. Section 104(a)(2) – Part of the Internal Revenue Service Code that allows monetary amounts received for physical injury or sickness to be excluded from gross income amount on a person’s tax filing. Section 130 – Part of Public Law 97-473 that amended the Internal Revenue Code of 1954 to allow qualified assignments to third parties to be responsible for making payments to claimants on cases involving physical injury or sickness. The law allows the assignee to pass the payments to the recipient(s) tax-free.

Settlement Agreement – Legal document executed by all parties of a lawsuit or claim stating case facts and terms by which plaintiff releases the defendant. Payments made by defendant, purchase of annuity and consent language for the assignment may appear within the document as well.

Single Premium Deferred Annuity – Annuity purchased for a single premium with a payout at a later date