Annuity Rates and Impaired Life Ratings

Factors Affecting Annuity Rates

Annuity rates depend principally on the following two factors:

  1. Prevailing Interest Rates. Based largely on today's prevailing interest rates, the annuity company projects the amount of income it will earn on its current and future investments. Based on that projection, the annuity company determines the amount of investment income that can be paid to a claimant by way of a structured settlement and, at the same time, maintain an acceptable profit margin for itself. The higher today's prevailing interest rates, the more investment income the annuity company anticipates earning. As a result of higher interest rates, the annuity company can promise today to pay more to the claimant by way of a structured settlement and still maintain an acceptable profit margin. When prevailing interest rates rise, published annuity rates decline and vice versa.

  2. Life Expectancy. Most structured settlements provide for payments to the claimant for his or her life only or for a period that is contingent at least in part on the claimant's life. In such cases, the longer the claimant is expected to live, the greater is the cost to provide a given level of benefits.

    The life expectancy of a claimant is based on three factors: sex, age, and medical condition.

    Unless provided with evidence to the contrary, annuity companies assume a claimant has a normal medical condition and, therefore, a normal life expectancy. As a result, published annuity rates are by sex and age only. However, substandard (i.e., lower) annuity rates are available if the annuity company is provided with evidence that the claimant's life expectancy is less than normal.

Medical Conditions That Might Reduce Life Expectancy

Many serious injuries can reduce a claimant's life expectancy. However, it is not necessary that the reduced life expectancy be caused by the injury that is the subject of the claim. Any claimant, therefore, may qualify for a substandard rate.

The evaluation of a claimant's life expectancy is made by physicians who are employed for that purpose by the annuity companies. Their evaluation is based on a review of medical information provided to them by LMGA. That information is provided to LMGA by the claim representative or defense attorney.

The following medical conditions are likely candidates for a substandard or impaired life rating:

  1. Serious head injuries with residual brain damage (e.g., seizures);
  2. Spinal cord injuries resulting in functional disabilities (e.g., paraplegia, quadriplegia);
  3. Serious internal injuries resulting in removal of vital organs;
  4. Serious burns involving internal damage; and
  5. Any other condition, whether or not related to the incident, that might reduce life expectancy (e.g., heart condition, cancer, kidney condition, diabetes).

Relevant Medical Information

The types of information that should be submitted to LMGA and, in turn, by LMGA to the annuity carriers for all cases where a substandard age rating is sought are described below:

  1. The characteristics of the original insult. This is best provided by discharge summaries from hospitals and rehabilitation facilities. Nursing notes are generally not important.
  2. The current medical, environmental, and socio-economic status of the claimant. The attending physician's summary is a good source for this information.
  3. The interim course of claimant's condition (i.e., any change in claimant's condition between the initial injury and claimant's current condition). This is also generally provided by hospital discharge summaries and rehabilitation reports.
  4. Copies of the most recent medical reports by the claimant's primary treating physician.
  5. Copies of EKG, EEG, and CAT scan test reports. Routine X-rays and other test reports are generally not important.
  6. Copies of hospital operative reports.
  7. Copies of medical reports by physicians who examined the claimant on behalf of the defense or plaintiff.

The more current and complete the records and reports, the more value given them by the annuity carriers.

Please do not send medical bills.

Example of Substandard Age Rating

Assuming a female age 3, the table below demonstrates the cost of providing $1,000 per month for life only. Furthermore, the tables show the effect of cost when a 3% annual increase is included. Most importantly, the table also illustrates how the cost per $1,000 is decreased if the 3 year old female is medically determined to have the mortality probabilities of a 23, 43, or 63 year old.




Actual age 3



Rated age 23



Rated age 43



Rated age 63



NOTE: The above costs are for purposes of illustration only and might not accurately reflect today's market.


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Phone: 513-871-8900  Fax: 513-871-9099