How can I avoid getting scammed by a structured settlement annuity?
Under section 5-1702 of New York's General Obligations Law, the settling defendant must provide you with a written document that discloses the following: #1: The amounts and due dates of the periodic payments to be made under the proposed structured settlement annuity; #2: The amount of the premium payable to the annuity issuer for the annuity contract that will fund the period payments; #3: The present value of all periodic payments that are not life-contingent, and the amount of the discount rate used in determining the present value; #4: The amount of the costs and the commission (typically 4%) that are paid to the annuity issuer; #5: Whether the transfer of periodic payments is restricted, and may be prohibited, under the terms of the structured settlement agreement; #6: That any transfer of the periodic payments by the plaintiff may subject the plaintiff to adverse tax consequences; and #7: The plaintiff is advised to obtain independent professional advice relating to the legal, tax and financial implications of the structured settlement, and no defendant, or legal representative of a defendant, may refer the plaintiff to any advisor, attorney or firm for purposes of such independent professional advice.
Why should you insist that the settling defendant provide the full disclosure required by New York law? Life insurance companies issuing annuities in personal injury cases often pay kickbacks or rebates to the liability insurance company that requests the annuity. This is big business for liability insurance carriers because the kickback or rebate may be 1/2 or more of the 4% commission. In substantial cases, the kickback may be huge. Liability insurance companies will insist that you use their structured settlement broker so they can keep the lucrative 4% commission payable by the life insurance annuity issuer.
To avoid rebates or kickbacks between the life insurance carrier and the liability carrier, you should insist upon using your own structured settlement broker, who will give you advice to suit your specific needs and look out for your interests. You use the defendant's structured settlement broker at your own peril.