Disability Claim Settlements

Pursuant to IRC Section 104(a)(3) payment amounts received under disability policies as compensation for personal injuries or sickness may be excluded from gross income as well.

The advantages of structuring disability benefits to the Injured Worker are:

  • guaranteed benefits backed by larger company
  • possible continuation of tax-exempt payments
  • provides flexibility to seek other occupation/employment
  • provides flexibility to seek medical providers of choice

The advantages of structuring disability benefits to the Employer / Insurer are:

  • transfer of mortality risk to annuity company
  • transfer of investment risk to annuity company
  • reduction in liability reserves on the books
  • reduction in claims administration costs

Structured Settlements for disability claims can be very flexible and are often funded using Assumption Reinsurance contracts. These contracts can be designed to provide benefits for a set number of years, the duration of the disability, or until the claimant is 65.