A structured settlement is when an injured person receives periodic payments as compensation. They may choose to sell these payments to a structured settlement company for a lump sum, though at a discounted amount. Careful consideration and professional advice are recommended before selling.
Once sold, the structured settlement company receives the future payments, while the original recipient generally gets immediate access to a larger lump sum. In case you don’t know, selling this financial product means you are transferring the right to future payments permanently. So, it is recommended to seek advice from a financial adviser before selling them.
As a monetary award agreed-upon by a court, structured settlements are used as a method for paying off an injury claim. Many times, the structured settlement is offered in lieu of a single lump sum of cash when a case in the court system has been settled.
An Upfront Initial Sum of Cash
Before any claimant in a case makes a final agreement on exactly how best to settle, it is important to have a discussion with their attorney and doctor. Even in states that do not allow lump sum payments, the claimant can maintain control over how the settlement is paid. Claimants that are suing because of injury might require larger sums of cash to offset one-time purchases of necessary durable medical equipment. Sometimes the settlement can be set up in a way that an initial lump sum of cash is provided with the remainder of the money owed delivered in regular installments over a pre-determined period of time.
Renegotiating Is Often Difficult
Once the settlement has been agreed upon and accepted by the court, any renegotiation or altering of the settlement is usually extremely difficult, if not impossible. Most states allow the structured settlement to be purchased by an insurance company or an annuity company for a reduced amount from the defendant. The insurance company is than allowed to invest the lump sum of cash and pay the claimant the full amount of the money owed overtime.
This process certainly benefits the defendant, because they can purchase a high value annuity plan to cover the settlement, for a reduced amount of money. It certainly benefits the annuity company or insurance company because they make money through the process. However, it does not always benefit the claimant in the case.
The claimant may not have all the funds they need to live a lifestyle that matches the way they lived before the injury occurred. They may require additional income, and would have fared better if they had received the lump sum amount of cash. Even though the court system likely chose structured annuity payments as the preferred method for settling the case, it might actually be hurting the claimant over time.
Selling the Structured Settlement
Many reputable businesses offer the opportunity to sell a structured settlement annuity. The simple process takes just a couple of months to accomplish. The purchase will often involve the court system, where the judge needs to accept the new terms of selling off all future payments for a lump sum of cash.
For any claimant interested in selling off their structured annuity, it is important to receive a couple of bids from different reputable companies. This will ensure they are getting the best price for the value of all future payments.