by John Darer CLU ChFC MSSC RSP CLTC
The words "certain" and "guaranteed" are common terms used in settlement documents to describe payment obligations, and in structured settlement annuities and other income annuities. Both are often used in a way that suggests the terms are synonymous, but are they synonymous? Is there any potential for confusion down the road?
Let's consider one of the most common types of structured settlement payments
Certain period and life. A certain period provides that payments will be paid for life, but at least for a minimum certain period of time whether or not the measuring life is alive when the payment is due. So if your structured settlement has monthly payments for life with 30 years certain it means that payments will be made for 30 years (360 monthly payments), whether or not you as the measuring life are living and then only if you are living from month 361 onward.
The certain period starts when the first payment of the annuity payment stream begins. There is no new certain period if the original measuring life dies and a beneficiary starts receiving the annuity payments. For example if you have a 30 years certain and life annuity and the measuring life dies 15 years from the start of that payment stream, then 15 years (180 monthly payments) will be paid to the named beneficiaries.
Where could use of the term "guaranteed" create confusion?
All structured settlement payments are contractually guaranteed, even where they are life contingent. For example, if you are receiving payments from a 20 years certain and life annuity and it has been 22 years since payments began, the remaining payments are contractually guaranteed to be paid for the rest of your life (after which payments will stop). But the life contingent payments are not guaranteed to be paid whether or not the measuring life survives the entire payment schedule.
Berkshire Hathaway Structured Settlements, through its underwriting companies, Berkshire Hathaway Life Insurgence Company of Nebraska, First Berkshire Hathaway Life Insurance Company and National Indemnity Company, uses the term "certain" instead of "guaranteed" in its structured settlement quotes and contracts even refer to a lump sum payment as "certain lump sum".