Introduction
A structured settlement annuity is a powerful financial tool often used to replace future income for injury victims. This is especially important when an individual is unlikely to return to work or will experience diminished earning capacity due to catastrophic injuries. In these cases, the stability and predictability of a structured settlement annuity can create a dependable financial foundation that supports the client for the rest of their life. Because structured settlement payments are guaranteed, tax-free, and not subject to market volatility, they play a crucial role in long-term financial security for severely injured individuals.
For plaintiffs and attorneys navigating settlement planning, understanding how structured settlement annuities are optimized—particularly through tools like rated ages—can dramatically impact the long-term value of a client’s recovery. Rated ages allow annuity carriers to evaluate an injured person’s life expectancy in a way that often produces significantly enhanced lifetime benefits. When used correctly, these tools can transform a settlement into sustainable income aligned with the client’s actual medical and financial needs.
What is Rated Age?
In order to maximize the value of a structured settlement annuity for catastrophically-injured clients, we send a client’s medical information annuity companies for evaluation. Upon review of the medical documentation, the annuity companies assign the client a “rated age.” Essentially, a rated age is the statistical age of a client due to their injuries, and it is based on actuarial tables.
Rated ages are calculated by looking at medical records and using statistics about how long people typically live with certain injuries or health conditions. If a person’s injuries are serious enough that they are expected to have a shorter life expectancy, the annuity company assigns them an older “rated age.” For example, someone who is actually 30 years old might be considered more like age 55 or 60 for pricing purposes if their injuries are severe.
This distinction becomes especially important when an annuity company provides quotes for lifetime payments. The pricing—and the client’s ultimate rate of return—is based on the rated age rather than their actual age. This often results in significantly higher guaranteed lifetime payments for the client.
How Can a Rated Age be Beneficial to My Client?
Here’s another way to think about it: a rated age is most beneficial to a client with a lifetime benefit if the rating shows the injuries place them at an older age than their biological age. This means that — per premium dollar that is sent to the annuity company — the future payment to the client will be higher.
This process can be compared to the opposite of an evaluation for life insurance. When an individual applies for life insurance, they want to look as healthy as possible to get higher premiums.
It's the opposite when seeking a rated age for a catastrophically-injured client. The client will get better returns if their evaluation comes back showing their injuries will significantly shorten their life expectancy. This helps get them the highest possible rated age, which increases the rate of return on that annuity.
It’s no secret that structured settlement annuity interests are currently paying out at a very low rate of return (in this low-interest-rate environment). However, when dealing with a lifetime annuity for a client that is catastrophically injured and who has achieved a rated age, the rate of the return on the annuity can be much higher — and make the structured settlement annuity a stable, guaranteed, and tax-free investment.
Why Rated Ages Matter in Today’s Interest-Rate Environment
Structured settlement annuities don’t always pay high returns, especially when interest rates are low. But rated ages can change that. When a catastrophically injured client is given a much older rated age, the lifetime annuity is priced as if the company will be paying for fewer years — which means the client receives much higher payments for the same amount of money.
This is why rated-age annuities can still be a strong option even when interest rates aren’t great. The rated age boosts the payment amounts, creating a steady, guaranteed, and tax-free income stream that supports the client long-term. Unlike investments that depend on the stock market, these payments stay stable.
Overall, rated ages help severely injured clients get more financial security and better long-term support from their structured settlement annuity.
If you have more questions about rated age or structured settlements in general, give us a call. We’ll assess your situation and recommend the best strategies for your needs.
