Fixed and Variable Annuity
In the sense of structured settlement, an annuity is a payment made at a regular basis irregardless of the time frame. The payment can be made weekly, bimonthly, monthly, quarterly, or with any kind of time division depending on the agreeing parties. The total amount of money paid through an annuity should not have any discrepancy with the amount paid during a lump sum payment. The only main difference between an annuity and a lump sum is the time frame of the payment, no more and no less.
There are several types of annuity payments that can be chosen from depending on what will provide the greatest benefit to the recipient of the structured settlement payments. These types include fixed annuity payments, and variable annuity payments.
In a fixed annuity payment, the recipient of the money collects a constant amount of money for the whole period of the structured settlement. This is similar to credit card companies who obtain a constant amount of money from people who used their credit cards to buy stuff that are offered at 0% installment payments. On the other hand, a variable annuity payment involves payment of money that varies with a certain factor which is commonly economic in nature. Interest rates are deemed to be applied in variable annuity payments. This is similar to earning a salary that can be seen in annual level where the amount is believed to increase yearly.