Annuity and structured settlements are popular payment methods for lawsuit cases, lottery payments or other large payment awards. They pay money over time as opposed to a lump sum settlement option. There are many reason a person or an awarding entity may choose a structured settlement as opposed to a lump sum payment.
An annuity is a product sold and managed by an insurance company. Annuities can be either immediate or deferred. Money that remains in the account is sheltered from taxes until the money is withdrawn. In terms of a large settlement, you may be given the option to annuitize, or this may be part of the settlement requirements. When this happens, the money is placed in an annuity with you as the annuitant, and a payment schedule is created. There are two types of annuitization options: life certain or period certain. Life certain provides an income for your entire lifetime, while period certain provides income for a specified number of years.