Ultimate Guide to Selling Structured Settlement Payments

Choosing the Right Buyer for Your Structured Settlement

Selling your settlement payments is a major decision and choosing the best buyer can make a huge difference in how much you benefit from the transaction and how quickly the process is completed. In addition to reading online reviews, you should also be willing to reach out to the settlement buyer and receive some vital pieces of information. Utilizing all of these tactics make sure you’re fully educated on what the best option is.

To get started, find out the answers to these questions regarding a particular structured settlement company.

• Can you get a free quote
  with no obligation?
• Do customer service
  representatives honestly and knowledgeably answer your questions?
• Does the buyer put your
  interest first?
• Do you feel pushed into
  selling all of your annuity payments?

When choosing a structured settlement annuity buyer, you also need to look for a company in a stable financial situation with no history of bankruptcy or complaints with SEC or other authorities. Pay close attention to the reputation of the buyer, too.

It’s always a red flag if the buyer automatically suggests that you sell all of your payments. Instead, a good structured settlement company will offer a customized plan fit for your specific needs. They’ll also be transparent with their fees and be straightforward on how long it will take to get you your money.

Another trait of a good annuity buyer is one that answers promptly. You should also be assigned a dedicated customer service representative who is aware of your specific situation and is the person you speak to every time you call. This saves you time so you don’t have to explain things over and over again every time you call.

Finally, make sure you’ll be assisted with a court date and will receive help from the settlement company every step of the way. By finding a buyer with each of these qualities, you’ll be sure to get a smooth experience.

Selling Structured Settlements: How It Works

The payment you receive for selling your monthly payments varies depending on factors such as the buyer and how much you choose to sell. You don’t actually have to sell your entire annuity.

You can choose to sell just a portion of your structured settlement to receive a partial lump sum now, while still reserving some ongoing payments for the future.

To make the best choice for your individual situation, follow these steps to make the process as smooth as possible.

Step 1: Contact multiple companies for quotes

Start by getting free quotes from companies that buy structured settlements. You can compare different options for how to balance your monthly payments between now and the future, or opt to receive a lump sum now. Be careful in researching your selected companies to make sure they’re not actually the same company giving you two separate offers. You want to get truly competing offers before completing the deal. Once you evaluate the offers from different settlement purchasers, you can accept the best one.

Step 2: Have a court hearing and get a judge’s approval

Court approval is required to sell a structured settlement. It may seem like a cumbersome step, but it’s really meant to protect your financial interests. When you appear in court, the judge will ask you some questions about the agreement between you and the settlement buyer to confirm that you understand the details and that the agreement is in your best interest. Ideally, the judge will approve the sale at this point. Also note that some settlement buyers work to appear on your behalf so you don’t actually have to go to court in person.

Step 3: Notify the Insurance Company

Once your transaction order is approved in court, you can have a copy of the documentation sent to your insurance company. This lets them know that the annuity is being sold so they can complete the transaction on their end and communicate as needed to the structured settlement purchaser.

Typically, your purchaser should oversee this step, but it’s still good to stay on top of the details to make sure everything is happening as it should

Step 4: Receive Your Money

The final part of selling your annuity is receiving your money from the purchaser. This should be in lump sum. If you sold your entire annuity amount, you’ll stop receiving payments from the insurance company. Otherwise, you’ll receive reduced payments if you only sold a portion. Most structured settlement companies offer multiple payment option so you can choose the most convenient one for you.

Discount Rates Explained

When you start requesting quotes to sell your settlement payments, you’ll probably notice that the amount is lower than the total of your anticipated payments from your insurance company. That’s because of the “discount rate,” which is the industry term for the fee companies charge to purchase your annuity and provide you with a lump sum of money upfront in exchange for your future payments.

Here’s how it works in an example. With a $50,000 settlement, you might receive that in separate payments spread out over several years, perhaps even decades. If you want a lump sum right away, you’ll get less from a purchaser – a discount rate.

This is because over time, the cost of living increases and the value of a dollar today is worth more than it will be in the future. For example, back in the early 80s, the average cost of daycare for a child was $162 per month. Today, according to the NACCRA, the amount is $972 a month.

The exact discount rate and the size of your payout will depend on the buyer and various other factors, such as how far out are the rest of your payments. The further out they are, the higher the discount rate. You get less now because the settlement buyer has to wait longer to receive those funds. 

When evaluating the discount rate of each quote, also consider the services you’ll receive from the purchaser. CBC Settlement Funding, for example, fills out paperwork and goes to court on your behalf so that you don’t have to hire a lawyer, take time off of work, or otherwise inconvenience yourself. You’re getting quite a bit more than a company that just writes a check but expects you to do all the legal leg work.

How Selling Your Annuity Can Solve Financial Issues

There are many reasons people choose to sell their structured settlement payments, but it’s not something you should consider lightly. After all, you’ll be giving up a significant portion of your settlement, which has the potential to provide you with financial stability for many years to come. This is especially important if you’re unable to work in your previous field because of an injury or other issue that resulted in the settlement in the first place.

What is a good reason for selling your future payments?

There’s no one-size-fits all answer to this question. But we can give you an idea of some scenarios where it’s worth considering.

If you need a bit more flexibility to meet your financial goals or position yourself for a better future in the long-term, then selling your annuity be a good idea.

What is a Structured Settlement?

A structured settlement is often the result of a personal injury lawsuit in which the plaintiff (the party injured) receives periodic payments as a compensation for the injuries sustained in an accident.

Common ways people get settlements include:

• Medical malpractice
• Personal injury
• Worker’s comp
• Wrongful death

The income from a lawsuit in these scenarios generally comes through what is known as an annuity. The funds are received as stream payments from an insurance company.

In most cases, you’ll receive the income as a monthly stream of payments over a certain period of time. However, some people do not consider a long-term stream of payments as beneficial compared to a one lump sum payment.

That’s where selling your settlement payments comes in. Consider the pros and cons of both payment options to determine your best course of action moving forward.

Structured Settlement Protection Act

This type of law is enacted at the state level and is designed to protect your best interests surrounding your structured settlement. While the exact specifications vary depending on where you live, the consistent theme is required transparency from the factoring company you choose to work with.

Court approval is a must in order to complete the transaction and you must receive a disclosure statement outlining all of the details within the agreement, including the difference between the payout you’ll receive and the long-term value of the annuity.

Each state also has its own “cooling-off period,” during which you can change your mind and cancel the transaction. These laws are meant to favor you so you can fully understand the process and maximize your benefit from it.

Frequently Asked Questions

by Lauren Ward

Personal Finance Writer

Lauren Ward is a personal finance writer with nearly ten years of experience covering topics like loans, credit, and real estate. She lives in Virginia with her husband and three children.