Important Factors To Consider When Selling Structured Settlement Payments
Many times, the offered compensation is paid to the claimant (the one that filed suit) as a regular monthly or yearly installment over a substantial amount of time. The installment plan is often referred to as a structured settlement, or an annuity, if that is the method of payment.
In all likelihood, part of the agreement for the settlement involves the ability for the defendant to purchase an annuity offered by insurance companies. Typically, the purchase price is far less than the total amount due to the claimant. As a result, an annuity is issued by the insurance company, making the claimant the beneficiary. Every month or year, as scheduled, the claimant will receive a check for an amount that was pre-determined during settlement.
Selling the Annuity
Over time, the claimant (the beneficiary of the annuity plan) realizes that he or she would prefer to receive cash in a lump sum, or need to receive it. Because of that, the person is willing to sell the structured annuity rather than accept small payments in future years.
Many times, it is a necessity to sell the annuity payments, not a desire at all. The scheduled paychecks that arrive every year or month might not be enough to effectively manage the amount of income required to maintain daily living. It may be a result of the high cost of medical bills, credit card debt, or potential foreclosure. Sometimes, selling the future annuity payments is a necessity in the hope of making ends meet.
Assessing Its Value
Reputable third-party companies will fully assess the current value of the annuity payment stream to ensure that the owner of the structured settlement receives its full worth. However, this is not to suggest that its actual value in a secondary market (where a company purchases the annuity) is based on the total of all remaining payments. In all likelihood, reputable companies will offer a discounted price that represents its actual value in the secondary market.
Part of this calculation is based on the financial markets, and the interest rates they provide in loaning money. Additionally, the calculation will include how many payments remain for payout in the annuity, along with the lifespan of the policy. The company will also factor in the stability of past payments from the insurance company along with the potential risks (if any) involved in assuming ownership of the annuity.
All or Part
Many annuity beneficiaries are unaware that they do not need to sell off all of the future annuity payments. Third-party companies that specialize in buying structured settlements are willing to purchase all of it, or simply a portion. This allows the beneficiary to continue to receive checks and smaller amounts after receiving a large sum of cash.
The NSSTA
It is important that the owner of the annuity seeks out structured settlement companies that are affiliated with the National Structured Settlements Trade Association (NSSTA). This will ensure they are getting a proper deal and a competitive price for the value of their structured settlement.
The organization has memberships of hundreds of insurance companies and licensed insurance brokers, along with other organizations involved in structured settlement administration. Every company can only become a member of the organization after they agree to follow the strict code of ethics.
Company Qualifications
The most reputable companies will have a high level of experience and knowledge in handling the entire process of transferring ownership of an annuity installment plan. It is important to consider each of the following characteristics before selecting the best company to purchase the annuity. These characteristics include:
- Full Knowledge – While the process of transferring ownership is easy on the beneficiary, the company making the purchase must understand all of the rules and regulations and current laws involving structured settlements. They will need to have experienced teams that help walk the current annuity owner through the process.
- The Customer’s Best Interest – When speaking directly to the company, it is important to understand that they have the customer’s best interest in mind, and not just merely looking out for their own profits. A reputable company will ensure that the annuity holder is only selling what they need to, to fulfill any current desire for extra cash.
- A Reputable History – A reputable track record is the easiest way to understand if the annuity policyholder is being scammed or not. Performing a quick check using the Internet is a simple solution for determining what companies are reputable, and which ones are not.
- A Fair Price – A reputable company will offer a fair price for the actual value of the policy on the open market. They will typically work hard to fully comprehend the annuity holder;s financial situation and formulate an effective plan for providing the funds that are specifically needed. Additionally, they will do everything in their power to move through the process as quickly as possible. Traditionally, it should take between 60 and 90 days from the application to check in hand.
Like every type of financial transaction, the annuity policyholder will need to provide the necessary proof of ownership of the asset that is being sold. In this case, it is proof of the monthly or yearly annuity payments. Providing a copy of the annuity policy is essential. In addition, the “benefits letter; (typically a one page document) that provides a summary of the policy is often requested too.
Many reputable companies are eager to buy a small portion of the entire amount of the annuity to quickly give the policyholder the funds they need. They will often work specifically with the annuity owner to provide a long list of possible options when selling the remaining payments of the structured settlement. In addition, they will follow all the state rules and regulations including providing a disclosure statement that details every aspect of the transaction.
