by John Darer CLU ChFC CSSC RSP CLTC
An annuity payment represents the liquidation of principal and interest under an annuity contract. An annuity payment can be made by check, or direct deposit to your bank account.
An annuity contract is a financial agreement between a life insurance company and its customer outlining each party's obligations. The customer pays a lump sum to the life insurance company as consideration for the promise to make payments in the future. Among other things, the annuity contract sets forth the amounts of payments, the mode of payments (e.g. monthly, annually, deferred lump sums) and the timing and duration of payments.
With a structured settlement annuity contract, the annuity is typically applied for by a qualified assignment company as a "qualified funding asset" pursuant to IRC 130(d), or by a non qualified assignment company when resolving other types of cases. The qualified assignment company, or non qualified assigmment company, has assumed periodic payment obligations pursuant to a settlement agreement resolving a legal dispute. While the annuitant or payee owns the right to receive payments, he/she/it is neither the applicant or owner of the annuity contract.
The sale of annuity contracts is regulated by your state insurance department*. An active license is required to be authorized to solicit consumers and place annuity contracts.
- The life insurance company that issues the annuity contract must be licensed as an insurer in your state.
- The specific contract form for the annuity must be filed by the life insurance company with the state insurance department and approved for sale in your state. Do not buy a contract that is not for sale in your state.
- Annuity contracts can only be sold to consumers by licensed life insurance agents or licensed life insurance brokers
* the sale of certain types of annuity contracts, namely variable annuity contracts, also fall under securties regulators.