A structured settlement is a way of settling a suit. Lawsuits often lead to companies or people paying others to right a wrong. The people responsible might agree to settle the issue, or they may be forced to pay the cash after losing a case in the courtroom.
If the total amount of cash is small, wronged parties will likely receive lump-sum settlements. However, for a large sum, structured settlements are often arranged.
How a Structured Settlement Works
When a plaintiff and defendant in a lawsuit agree to settle claims with structured settlements, the parties involved will negotiate the amount of money payable by a defendant for the plaintiff to settle the lawsuit. According to We Pay More Funding experts, if a structured settlement is used then cash is usually distributed as periodic payments, funded through annuities.
Sale Options: Partial vs. Full
If you choose to sell a structured settlement, you shouldn’t sell all the payments at once unless your needs require that. Rather, you can sell part of the future settlement payments, depending on your needs.
Most individuals choose to sell a specific number of payments. Doing so means they resume payment in the future. There is also the option of selling a portion of the payment. You will still get smaller monthly payments, but also receive a lump sum.
You are the best advocate, but getting help won’t hurt. If you are thinking of selling structured settlement payments, seek advice from a financial advisor, a trustworthy person, or an attorney.
No one should pressure you to do anything you haven’t researched completely.
Get and compare quotes from several structured settlement companies. Ask about the feedback to expect, and what will happen if the court doesn’t approve the transaction. You may want to talk to a lawyer about the court procedure and learn how long it will take.
When selling structured settlements, buyers will offer you a lump sum of money to buy your future annuity payments.
One reason discount rates are used is to counterbalance the risks the buyer assumes when purchasing future payments using a formula looking at the present value of money.
Getting Fair Quotes
If you contact any structured settlement company or buyer, know that the quote you will receive is at a discount on the current value of the payment. As per the National Association of Settlement Purchasers, the industry’s discount rate is between 9% – 18%. Factors that may affect the quote you get include:
- Any fees involved with transferring ownership
- The insurance firm’s rating
- The market’s current state
- The amount of payment you want to sell
- Payment schedule
A structured settlement is used to compensate individuals who have been harmed or injured by another entity. This kind of annuity may generate a stream of tax-free income that can be used to clear medical bills or be used however needed. Before you agree to structured settlements as part of lawsuits, it’s imperative to carefully read the fine print.