Large or catastrophic workers’ compensation claims are frequently settled with a structured settlement, as a structured settlement benefits both the insurer or self-insured employer and the injured employee. To assist our readers in better understanding the structured settlement process, we have put the process in a step by step format. The following is a generalized version of a standard structured settlement process. Please note that structured settlements do not always conform to the same process, and it is not unusual to alter or tailor the structured settlement to the needs of the injured employee.
The First Step of a Structured Settlement:
The injured employee or employee’s attorney and the claims professional or adjuster’s attorney must concur that it is in everyone’s best interest to settle the claim. In exchange for releasing the insurer or self-insured employer from further responsibility under the state’s workers’ compensation statute, the employee agrees to accept periodic payments over the course of a specific number of years or over the employee’s life time.
A structured settlement broker is contacted by the claims professional who requests a quote to determine the frequency and amount of periodic payments that can be purchased for a specific amount of money. The structured settlement broker will assist all of the parties involved in developing various structured settlement alternatives that meet the needs of the respective parties.
The Second Step of a Structured Settlement:
Generally, the insurer or the self-insured employer will want to remove the long-term financial obligation of a structured settlement from their accounting books. The primary way this is accomplished is to transfer the obligation from the insurer or self-insured employer to a third party, through a legal device known as a qualified assignment. The structured settlement broker will offer recommendations that best meet the needs of the parties as the broker develops the structured settlement quotes.
Third Step of a Structured Settlement:
The qualified assignment company purchases one or more annuities from a life insurance company. The qualified assignment company can be an affiliate or sister- company of the life insurance company from whom it is purchasing the annuity or annuities.
Depending on the terms of the structured settlement, there can be one or more annuities purchased. Annuities often include:
- The annuity to make the periodic payments to the injured employee,
- An annuity to cover future medical cost may be purchased,
- An annuity to cover the cost of a Medicare Set-Aside Agreement or Trust,
- An annuity to pay the employee’s attorney or law firm
- An annuity to pay the cost of a Special Needs Trust for the employee’s dependents who are mentally or physically disabled
The Fourth Step of a Structured Settlement:
Structured settlement brokers work with all of the parties and assist with orchestrating that all of the necessary legal paperwork is then completed as part of the structured settlement process. Once completed, the life insurance company begins the process of making the periodic annuity or annuities payments to the injured employee and/or other designees subject to the terms of the structured settlement agreement. Experienced structured settlement brokers can facilitate this process very easily given their life company relationships and years of expertise.
For assistance with your structured settlement needs, please contact us. We will be glad to assist you in contacting a structured settlement broker.
Author Michael B. Stack, CPA, Director of Operations, Amaxx Risk Solutions, Inc. is an expert in employer communication systems and part of the Amaxx team helping companies reduce their workers compensation costs by 20% to 50%. He is a writer, speaker, and website publisher. www.reduceyourworkerscomp.com. Contact: firstname.lastname@example.org.
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