Life Contingent 101: How Do Life Contingent Payments Work?

If you receive regular monthly income from a structured settlement, chances are that you’ve heard the term “life contingent payments.” Albeit a simple concept, many annuitants are not familiar with the particulars. In this article, we will explore some of the basic concepts involving structured settlement and life contingent payments in an easy-to-understand fashion although this is not a full exhaustive, comprehensive review and should not be regarded as financial, tax or legal advice.

Life Contingent Capital specializes in valuing and advancing the present value of future life contingent payments to those due to receive them in the future.

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How Do Life Contingent Payments Work?

Structured settlements are designed to provide income for those that were involved or otherwise a party to a personal injury suit. Most settlements result in a lump-sum payment to the beneficiary, but often this doesn’t meet ongoing living needs and expenses.

The compensation under these settlements is initially designed in a customized, unique manner and set up for the specific situation of the underlying, but typically payments are made either on a monthly basis or in installments every several years (or a combination of both). Depending on the nature of the settlement, multiple individuals in one family may receive structured payments over time.

In the case of monthly payments, there are two typically two variants: “guaranteed” structured settlement payments and life contingent payments, both of which are fully described in the annuity contract.

The Two Types Explained

Guaranteed settlement payments are those that will be disbursed by the annuity issuer regularly and until a predetermined date. The word “guaranteed” might not appear on the annuity contract itself, but the payments will be described with a start and end date as well as frequency of disbursements.

Typically, you will receive monthly payments at approximately the same date every month, however during the holiday season oftentimes such payments are delayed. A quick call to the annuity issuer of your policy should be able to resolve any questions about the status of a particular payment. If the underlying beneficiary is deceased during the time that a payment is scheduled to be made, that payment will be made to that individual’s estate or other designated beneficiary.

In a typical setting, these will be monthly payments payable for the first twenty or thirty years under the terms of the settlement, and can often have a “cost of living adjustment” that increases the amount paid over time to account for inflation and anticipated increases in general expenses over the course of life.

Life contingent payments are similar to guaranteed payments in that they provide regular income to the beneficiary. However, one difference is that these payments will only continue to be disbursed so long as the beneficiary is living.

Oftentimes, individuals receiving life contingent payments will explore the option of receiving the present value of those payments now instead of waiting in order to secure immediate financial security or for estate planning purposes. For more information, feel free to submit an online inquiry on or give us a call at (833) 760-4006. The process of receiving the present value, or “transfering”, future payments has multiple steps that our experienced account representatives can guide you through.

Things To Keep In Mind

Some structured settlement policies provide for irregular payments that either change over time or increase by a certain percentage every year, and sometimes it can be difficult to keep track of the changes. In order to stay on top of these changes, you have the option of requesting a summary of the payments still payable to you, known as a “benefits letter”, which is a service that the annuity issuer will provide to you free of charge.

Depending on the policy of the specific insurance company, they may even be able to describe the payments remaining over the phone in addition to sending an updated copy in the mail to the address that they have on record.

Keep in mind that if you move houses, the annuity issuer might not be aware of this change and could continue to send settlement checks and other communications to the wrong address, so be sure to call your representative at the annuity issuer and keep them updated about any address changes.

In conclusion, there are a few differences between guaranteed and life contingent payments that all recipients of structured settlement payments should be aware of. These differences are  important when considering the possibility of assigning future payments for their present value today, but also for estate planning purposes and understanding the nature of your payment stream and its continuity.

Life Contingent Capital and its affiliates are purchasers of assets. Nothing written on this website or blog should be construed as financial, tax or legal advice; you should obtain independent financial, tax and legal advice in connection with any transfer of structured settlement payment rights.

Interesting related article: “What is an Annuity?