Why considering a Structured Settlement Is a Wise Decision

by Mike on December 15, 2013

Why considering a Structured Settlement Is a Wise Decision

Every day, in courtrooms all across the nation, lawsuit defendants are ordered to pay claimants enormous amounts of money to settle their cases. Many times, the court system provides the defendant the opportunity to purchase a structured settlement annuity from an insurance company for a reduced amount of the money they owe the claimant. The life insurance company will issue a policy where the claimant is the beneficiary and will receive annual or monthly checks for a pre-set amount of years.

So what are the Benefits of Structured Settlements

The courts often recognize that structured settlements are effective solutions that can be used by the defendant to lower the amount of money they need to pay the claimant to settle the suit. It can reduce the amount of financial burden on the defendant significantly. The insurance company will benefit greatly by issuing a policy and taking the funds to invest. They can generate profits for the insurance company while providing the beneficiary the amount of money owed to them.

The court system also often believes that the structured settlement is also an effective solution for the claimant in the case. It provides a monthly income for a preset number of years to cover a variety of expenses including mortgage payments, car payments, living expenses, and medical debt. The structured settlement often works well for the beneficiary that is unable to work at a job full-time and reduces their cost on society.

 

The Disadvantages of Structured Settlements

While there may be significant benefits of obtaining an annuity for all concerned, it can often be disadvantageous to the claimant for a variety of reasons. First, when the annuity policy has been issued, it cannot be altered, changed, or renegotiated. Second, its inflexibility makes it impossible for the claimant to obtain a larger amount of cash during stressful times, to cover unexpected expenses, or for any personal reason. Third, the only way to circumvent the problem is to sell all or a portion of the entire annuity to a third-party, and convert it into cash.

 

Selling the Annuity

Many reputable third-party companies offer beneficiaries cash for their structured settlements. Each one will offer a bid or quote on the amount of remaining payments, while considering the performance of all past payments from the annuity company. Generally speaking, structured settlements that have been paying out for years are often rated higher than those that have been newly issued. This is often based on understanding the stability of the company, where payment consistency rates a higher expectation of receiving future payments.

The beneficiaries of the annuity should obtain at least two or three different quotes on their structured settlement before selecting the best reputable company. Often times, these companies will have the experience required to get the sale of the annuity passed through the legal system and signed off by a judge.

Whenever selling a structured settlement, it is important to determine whether to sell it in its entirety, or to offer only a tiny portion in exchange for a lump sum.

 

Have you had to consider a structured settlement in court? Have some feedback for our readers on how they can use a structured settlement? Leave us a comment and dont forget sharing is caring!

 

 ***Photo thanks to Sam Howzit***

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