He suggests consumers consider the following points when contemplating using an RAA as a settlement option:
- What interest rate will be paid on the proceeds?
- How will the interest rate be determined and how will the interest be credited to the account?
- Will the proceeds be held in a bank? If so, what conditions and limitations are applicable to the account's FDIC protection?
- Will the insurance company hold the proceeds? If so, what conditions and limitations apply to state guarantee fund protection of the proceeds should the insurer fail?
- Will the proceeds be held in a bank checking account or in an insurer draft account?
- What banking services, if any, will be provided?
- What services will be provided at no charge and what services will involve a fee?
As you discuss these points with clients, also be sure to mention that RAAs are but one of several settlement options available. Others typically include a lump-sum payout, installment payouts for a fixed amount or period of time, installment payouts for a lifetime and interest-only payouts.
