Commutation
Categories: Regulations
Commutation is the substitution of one thing for another. In legalese, that parse equates to substituting a longer sentence for a shorter sentence. Your 25-year sentence is reduced to 10 years. So…robberies are out there just waiting for you to...execute.
Similarly, in financial terms, commutation still means the substitution of one thing for another. Specifically, in the case of annuities and life insurance, the beneficiaries of these two products can exchange a series of payments over years for a lump sum payment.
Example. A ten-year payment plan of $10,000/year becomes a lump sum payment of $89,000.
The conditions for the commutation can differ. It can be requested by the beneficiary in the event of a health or disability need, or it can be proposed by the insurance company to clear the books now rather than over time.
Think of it in the context of lottery winners who take annual payments of a million bucks a year on their $20 million powerball victory.
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