Structured settlement annuities are among the safest, most reliable financial options for claimants involved in personal injury cases. By placing settlement proceeds into a structured settlement annuity, the claimant can take advantage of 100% income-tax free payments and a steady stream of income. But did you know that for some claimants, there may be a way to maximize the guaranteed structured settlement payout?
What is a Rated Age?
Insurance companies that carry structured settlement annuities use a variety of factors to determine what is referred to as a “rated age”. The rated age reflects what the underwriters at an individual insurance company believe a claimant’s life expectancy will be. Each company uses its own set of factors to formulate a rated age, so the number could vary widely.
A claimant who suffered catastrophic injuries will most likely have a higher rated age than a claimant who suffered non-life threatening injuries. Even if your catastrophically injured client was born in 1983, an insurance company could issue a rated age that is 30 or 40 years older, if the company determines a short life expectancy for the claimant.
How Do Insurance Companies Use Rated Ages?
Generally speaking, if your client has a higher rated age, the insurance company will issue the structured settlement annuity at a lower premium. The company assumes that with a shorter life expectancy, it will not have to make payments as long as it would for an individual with a normal life expectancy. While it is certainly the case that some injured claimants outlive their life expectancy, the insurer spreads that risk out over thousands of claimants.
Here is an example of how varied the spread of rated ages can be across different insurance companies:
Now let’s look at how John Doe’s structured settlement proposal looks with a rated age and without a rated age:
In the proposal* above, John Doe wants an annuity that will provide him with $1,000 per month and a guaranteed total payout of $300,000. Without factoring in a rated age, the annuity costs him $279,905.58.
On the other hand, when a rated age is used for John Doe, his rated age is higher than his actual age. John Doe can then get the same policy for only $228,734.55, saving him over $50,000. In the life of an injured client, $50,000 can make a big difference!
Contact Traci Kaas Today
Our team works with attorneys and claimants to gather proposals from the top structured settlement carriers. Contact us today at 800-354-2258 or firstname.lastname@example.org to learn more about maximizing your client’s settlement proceeds.
*NOTE: Proposal intended for illustrative purposes only. Actual proposals may vary by claimant and insurer.