Structured Settlements

You must negotiate the structured settlement before judgment or during the settlement process

In ICBC claims, a structured settlement is usually available to you, if requested.  You must negotiate the structured settlement before judgment or during the settlement process.  After judgment, the option of a structured settlement is no longer available.

A structured settlement, in simple terms, is an annuity purchased at the time of the settlement, which provides a stream of income over a certain period.  The significant advantage to a structured settlement is that you receive a certain stream of income tax-free over a given period. Also, the principal of the investment and the monthly payments are creditor proof and are generally not reportable to government agencies if you are on disability. The amount you receive and the length of time over which you will receive it is highly dependent on the annuity that you purchase and your own individual choices and needs.

ICBC is usually in favor of providing a structured settlement even though they must guarantee the structure. That is, if the insurance company that sells the structure goes out of business, ICBC may be on the hook to pay the structure.

Because ICBC may have to honor a guarantee, they limit the number of insurance brokers that can place the structured settlements together with the number of insurance companies that can sell the structured settlement through the insurance broker.  The result is that there is less competition and the rate of return on your annuity is usually lower than what you could otherwise potentially achieve in a riskier and less conservative investments.

The number one advantage is if you are unable to manage your money, the structure will prevent you from using your money too quickly. The structure allows set payments for a long time. In other words, the structure prevents you from blowing your settlement quickly and being left with nothing for the rest of your life.

The obvious disadvantage of a structured settlement is that you do not get immediate use of the entire net settlement funds to be used as you see fit.  Once you buy the annuity you are struck with its terms and there is no turning back.  However, it is no different than having a pension plan where you know you are getting a certain amount of income each month.