Structured settlement annuities are financial arrangements that provide periodic payments over time instead of a lump-sum payout. Companies that issue or help design these annuities play a crucial role in ensuring financial security for plaintiffs, injury victims, and others who need stable, long-term income. This article examines what structured settlement annuity companies are, how they work, major players, pros & cons, and how to choose one.
What Is a Structured Settlement Annuity?
A structured settlement annuity is a legal/financial arrangement arising often from lawsuits (personal injury, wrongful death, workers’ compensation, etc.) in which a defendant or insurer agrees to make periodic payments to a claimant instead of or in addition to a lumpsum. These payments are generally tax-advantaged or tax-free under certain jurisdictions. Annuity.org+2Annuity.org+2
Key features include:
- Guaranteed periodic payments (monthly, quarterly, annually, etc.). Annuity.org+1
- Tax benefits: often payments are not subject to federal/state income tax (especially in personal injury or wrongful death cases). Annuity.org+1
- Use of an assignment company which purchases the annuity from a highly rated life insurance provider. Annuity.org+2SOA+2
- The structure is usually fixed once agreed; changing terms, accelerating payments, etc., is generally difficult or impossible. Amicus Settlement Planners+1
How Structured Settlement Annuity Companies Work
Structured settlement annuity companies work within a legal, insurance, and financial framework. Here is a simplified process:
| Stage | Who is involved | What happens |
|---|---|---|
| Settlement Agreement | Plaintiff, Defendant (or insurer), attorneys, and sometimes a consultant | They negotiate the total settlement, including what portion will be paid over time via structured payments. |
| Qualified Assignment | Defendant or insurer transfers obligation to third party (assignment company) | Removes the defendant’s liabilities from books; assignment company takes on payment obligations. Annuity.org+1 |
| Purchase of Annuity | Assignment company works with a life insurance company | The annuity is purchased and becomes the funding vehicle for periodic payments. Annuity.org+1 |
| Payment Phase | Insurance company or annuity issuer → Claimant | Payments according to schedule; guaranteed amounts; sometimes with cost-of-living adjustments or other riders. prudential.com+1 |
Companies in this space typically fall into two classes:
- Issuers / Underwriters / Life Insurance Companies – These are companies that actually issue the annuity: they guarantee the payments. Examples: MetLife, Prudential, New York Life, Pacific Life. prudential.com+34Structures+34Structures+3
- Structured Settlement Consultants / Brokers / Planning Firms – Organizations that help plaintiffs and defendants design the structure, select appropriate annuity issuers, negotiate terms, and ensure tax and legal compliance. Examples: Atlas Settlement Group, Monarch Structured Settlements, Capital Planning, Amicus Settlement Planners. Amicus Settlement Planners+3Atlas Settlement Group+3Monarch Structured Settlements+3
Leading Companies in the Field
Here are some of the major structured settlement annuity companies and settlement planners in the United States, their strengths, and what clients often look for.
| Company | Core Strengths / Reputation | Key Notes |
|---|---|---|
| MetLife | One of the largest issuers; high volume; strong financial ratings. 4Structures+1 | Known for reliability and a broad range of annuity products. |
| Pacific Life | Strong in placing structured settlement annuity premiums; known for stability. 4Structures | Good history in customer service, competitive rates. |
| Prudential Financial | Offers flexible payment schedules; products that include cost-of-living adjustments and indexed growth protections. prudential.com+24Structures+2 | For those needing more complex payment arrangements. |
| New York Life | Very strong financial strength ratings; long track record. 4Structures+1 | Seen as a safe issuer; less flashy but deeply trusted. |
| Atlas Settlement Group | Settlement planning expertise; placing over $10B premiums; large network of brokers. Atlas Settlement Group | Good for guiding plaintiffs through the legal and financial complexities. |
| Monarch Structured Settlements | Good for personalized attention; helping attorneys & claimants with planning. Monarch Structured Settlements | Emphasis on service quality. |
Advantages & Disadvantages
Like any financial product, structured settlements have both upsides and downsides. Understanding both helps in making an informed decision.
Advantages
- Steady income stream: You get predictable payments over time, which helps with budgeting and long-term financial planning. Annuity.org+1
- Tax benefits: Payments from structured settlements are often tax‐free in personal injury, wrongful death, and similar cases. Annuity.org+1
- Risk protection: The payments are backed by insurance companies, so less exposure to market fluctuations. Annuity.org+1
- Customized schedule: Ability to tailor when payments begin, how frequently, and the amount, sometimes with cost-of-living adjustment (COLA). prudential.com+2Annuity.org+2
Disadvantages
- Lack of flexibility: Once set, you usually can’t change payment amounts, timing, etc. Offers limited control. Amicus Settlement Planners
- Lower return compared to riskier investments: Because of guarantees and safety, returns are modest. Amicus Settlement Planners
- Potential discount when selling: If you need cash immediately, selling future payments to a factoring or purchasing company involves a discount, often 9%–18% or more. Annuity.org+1
- Legal / administrative complexity: Setting up, choosing the right insurer, ensuring legal compliance and state approvals can be involved. Annuity.org+1
Regulatory & Tax Considerations
Structured settlement annuity companies must comply with various tax laws, insurance regulations, and state laws. Key points:
- Internal Revenue Code Sections: In the U.S., Section 104(a)(2) often provides that proceeds from personal injury structured settlements are tax-free. Qualified assignments may also be necessary. Annuity.org+1
- Structured Settlement Protection Acts: Many U.S. states have protection acts requiring court approval for transfers (i.e. when a recipient sells or transfers their payment rights). This is to prevent exploitative factoring arrangements. Annuity.org+1
- Rating agencies: Insurance issuers are evaluated by agencies like A.M. Best. Claimants often look for companies rated A or higher. Annuity.org+1
How to Choose a Structured Settlement Annuity Company or Consultant
If you (or your legal counsel) are looking at settling via structured settlement, or purchasing an annuity, here are some criteria to evaluate companies:
- Financial strength and ratings
The insurance company issuing the structured settlement must have stable, strong credit/rating (A, A+, A++ etc.). Poor ratings increase risk that payments might be delayed or threatened. - Reputation, experience, and trustworthiness
Look at how many years in business, how many structured settlements placed, references, reviews, and also state licensing status. Settlement consultant firms should adhere to ethical codes. - Flexibility in payment schedules
Whether you can choose monthly vs annually, when payments start, whether COLA adjustments are possible, whether lump sum or future scheduled deferrals are allowed. - Transparency of fees and costs
Are there “assignment fees”, setup costs, hidden charges? Are discount rates clearly disclosed (for factoring or selling)? - Customer service and legal support
Because structured settlements require legal documentation, court approvals (if needed), and tax compliance, the level of support from the company or consultant is important. - Geographic licensure & jurisdictional considerations
Laws vary by state/country. If the settlement is in one jurisdiction, ensure the company is compliant there.
Major Players & Market Size
The structured settlement annuities market is large and well established. Some data points:
- In 2024, the U.S. structured settlement primary market saw placements close to US$9.6 billion in annuity premiums. 4Structures
- The top issuers by volume that year included MetLife (around US$3B), Pacific Life, Prudential, USAA Life and New York Life. 4Structures
- Settlement planners and brokers together have placed tens of billions in structured settlement annuities over decades (e.g. Atlas has placed over $10B in premiums). Atlas Settlement Group
Common Myths & Misunderstandings
Here are some things people often get wrong about structured settlement annuity companies:
| Myth | Fact |
|---|---|
| “I’ll get more money if I take a lump sum.” | Maybe initially more, but you lose steady income, tax advantages, and risk protection. A structured settlement provides long-term stability. |
| “Structured settlement payments can be changed any time.” | Usually false. Once the structure is set and court/contract signed, altering payments reliably is very difficult. |
| “Issuers are shady or unreliable.” | Reputable issuers are heavily regulated and are large, well-rated insurers. The risk comes more from unvetted purchasers or factoring companies. |
| “Selling my payments is the same as taking a loan.” | Not exactly: when you sell structured settlement payments, you are selling the rights to future payments (at a discount), not borrowing. Annuity.org+1 |
Selling Structured Settlement Payments vs. Keeping Them
Sometimes people with structured settlement annuities want cash now, so they consider selling future payments. This is done through factoring/purchasing companies. Important things to know:
- Discount rate: The amount you get today is less than the sum of future payments because the purchasing company discounts for risk, time, profit. Rates often range between 9% and 18% or higher depending on state and case. Annuity.org+1
- Court approval: In many jurisdictions, selling or transferring structured settlement payment rights requires court approval. This is especially to protect claimants (often vulnerable, minors, etc.). Annuity.org
- Potential loss vs immediate need: While lump sum might address immediate financial pressure, over the long term you may receive much less than if you had simply kept the periodic payments.
Practical Tips for Claimants & Attorneys
- Always consult legal and financial advisors to understand the tax implications, payment schedule, and whether a structured settlement is appropriate.
- Get multiple quotes if considering selling any payments; compare discount rates, fees, net amounts.
- Confirm the issuer’s rating from independent agencies; check company license, state regulators.
- Ensure settlement agreement includes all needed language (assignment, non-qualified vs qualified assignment if needed, etc.).
- Think long term: inflation, changing needs (medical costs, long-term care), potential future income sources.
FAQs
Q1: Are structured settlement annuity payments always tax-free?
A: They are tax-free in many personal injury, wrongful death, and certain workers’ compensation cases. But in other types of settlements (e.g. punitive damages, emotional distress in non-physical injury cases) there may be tax consequences. Always check with a tax professional. Annuity.org+1
Q2: Can I change the payment schedule after it’s set?
A: Usually no. Once the settlement, assignment, and annuity are finalized and court approved, the terms are fixed. Some exceptions may exist in rare circumstances.
Q3: What happens if the insurance company issuing the annuity becomes insolvent?
A: That depends on state insurance guaranty associations, the insurer’s reserves, the rating of the company, and whether there were guarantees in place. Using highly rated insurers mitigates this risk.
Q4: Is selling structured settlement payments (factoring) a good idea?
A: It depends on your immediate financial need versus long-term income. Because of discounting, you’ll get less money overall. It’s often a last resort.
Conclusion
Structured settlement annuity companies provide a vital service to claimants needing stable, predictable income streams in place of lump sum settlements. By combining legal, insurance, and financial expertise, these companies help ensure long-term financial security, but the trade-offs (lower flexibility, potential loss if selling payments) must be well understood. Choosing the right company means carefully evaluating financial strength, reputation, flexibility, and full transparency. If you or someone you are advising is facing structured settlement decisions, getting professional advice early can make a big difference.