Annuity Interest Rates. Life insurance companies aren’t tied to any one interest rate when determining the rate of return for a structured settlement annuity. This rate flexibility was evident when we prepared structured settlements this week for two injured clients. While the 10-year Treasury rate is currently under 1 percent, the insurance company was able to offer significantly higher returns.
The first structured settlement was for a healthy 39-year-old male (no rated age involved) who will receive a lifetime monthly tax-free annuity, guaranteed for 25 years with a 2 percent annual inflation increase. The internal rate of return on the settlement is 2.35 percent that will commence in 60 days.
The second structured settlement was written for a healthy 39-year-old woman will also receive a lifetime monthly tax-free annuity, guaranteed for 25 years. The internal rate of return for her annuity is 2.25 percent with no inflation increase. These monthly structured settlements payouts are free of state and federal tax.
Many attorneys would be surprised to learn that interest rates for tax-free, structured settlement annuities remain relatively high despite all the recent talk about the Fed lowering short-term rates to near zero. In fact, the rate of return for annuities has been notably consistent for more than 10 years. Don’t hesitate to call so I can show you the benefits that these annuities can provide in an otherwise low interest rate environment.
Regulated Industry. Life insurance companies use a combination of safe and secure investments to determine the blended rate they will offer when creating a structured settlement annuity. On top of that, insurers are subject to mandatory annual audits and must follow state and federal regulations that require insurance companies to abide by strict solvency standards to protect customer assets.