A.M. BEST RATING:
Best’s Insurance Reports provide financial information concerning life insurance carriers. These reports include two different ratings. The "overall rating" assigns a letter indicator based on the company’s performance relative to the rest of the industry: A++ or A+ (Superior) is the highest rating possible. The "financial size category rating" is based on adjusted policyholders’ surplus and ranges from category I at up to $1,00,000; category V from $10,000,000 - $25,000,000; category X from $500,000,000 - $750,000,000; to category XV at $2,000,000,000+.

ANNUITY:
A stipulated stream of payments made at stated intervals, either for life or for a certain number of payments.

ANNUITY CERTAIN:
Guaranteed payments made to the annuitant or to his/her estate at periodic intervals for a predetermined number of years only; payments are not life-contingent.

ASSIGNMENT AND ASSUMPTION:
A transfer of some right, interest, or obligation from one person or entity (the assignor) to another (the assignee) and the corresponding assumption of that right, interest, or obligation by the assignee.

ASSIGNMENT FEE:
An administrative expense, usually a nominal flat dollar charge for each case, assessed in cases where the periodic payment obligation is assigned to a third party.

CERTAIN PERIOD:
Also known as guaranteed period. The pre-defined period over which payments will be made regardless of whether or not the annuitant is living. If the annuitant dies within the certain or guaranteed period, payments remaining in that certain period will be made as they come due to the estate of the annuitant.

CLAIMANT:
Party bringing claim against the insurance company, self-insured, or workers’ compensation carrier.

COLA:
Payments which increase periodically at a fixed percentage rate.

CONSTRUCTIVE RECEIPT:
Periodic payments made to a claimant under IRC section 104(a)(2) are excludable from claimant’s gross income so long as the claimant has neither actual nor constructive receipt of the sum spent to fund those future payments. Constructive receipt occurs when the claimant or his representative has control over the disposition of the money, when the present value is set aside specifically for the claimant, or when the funds become available to the claimant without qualification.

DEFERRED ANNUITY:
An annuity with payments later than one modal period after purchase of the annuity, e.g. a monthly income annuity where the first payment is due more than one year after purchase.

GUARANTEED (CERTAIN) PAYMENTS:
Payments that are not contingent upon how long the annuitant lives. If the annuitant dies, payments will be made as they become due to the decedent’s estate.

GUARANTEED PAYOUT:
The sum of all certain payments (i.e. guaranteed lump sums, annuities certain and the payments generated during the certain period of a life-contingent annuity). This amount may also include money paid out initially at the time of settlement.

GUARDIAN AD LITEM:
A person appointed by the Court during the course of litigation who protects the interest of a minor or an incompetent who is a party to a suit.

IMMEDIATE ANNUITY:
An annuity with payments commencing one modal period after the purchase of the annuity. Example: An immediate monthly annuity commences with payments one month after funding.

IRC 461(h):
Statute which affects the way self-insureds treat their long-term structured settlement obligations. Prior to the enactment of this section, some self-insureds accrued the total of the future payouts and claimed that amount as a deduction in the tax year in which the settlement was concluded. This statute allows deductions only when economic performance occurs (each time a payment is made to the claimant).

LIFE EXPECTED PAYOUT:
The total dollar payout under a life-contingent annuity plan where the payout is calculated on the annuitant’s statistical life expectancy.

LUMP SUM PAYMENT:
Payment of a fixed sum at a specified future date.

MINOR’S COMPROMISE:
Proposed settlement of a minor’s claim must be approved by the court.

NORMAL LIFE EXPECTANCY:
The number of years, statistically determined, that a person with a given sex and chronological age can be expected to live.

POLICY FEE:
A fee, ranging typically between $100 and $500, which is assessed on smaller premium cases (cases below $25,000).

POLICY OWNER:
In a structured settlement, the claimant cannot be the owner of the annuity policy. The obligor of the future payments (insurance company, assignee, self-insured, or work comp carrier) is the policy owner.

PREMIUM:
The cost of the annuity

PREMIUM TAX:
A tax on the purchase of annuities imposed by some states. The incidence of a premium tax is dependent on the domicile of the policy owner or the domicile of the life insurance company.

PURCHASE DATE:
A specified date for buying an annuity used in calculating its cost.

QUALIFIED ASSIGNMENT:
An assignment of a defendant’s/insurer’s obligation to an assignee pursuant to IRC Section 130.

QUALIFIED FUNDING ASSET:
If the structured settlement involves a Section 130 assignment, annuities or US Obligations are the only permissible funding assets.

RATE OF RETURN:
The discount rate at which the present value of the benefits equals a particular present value, usually the cost of the proposal.

SUBSTANDARD LIFE EXPECTANCY (RATED AGE):
Life expectancy which is shorter than normal due to a physical/medical condition. Substandard life expectancy is utilized with a rated age representing the subjective age which a person’s life expectancy is based. For example, if a 24 year old female is deemed to have a rated age of 54, the life insurance company is stating that for purposes of quoting life-contingent annuities, it would be priced using the life expectancy of a 54 year old woman.