What is a Structured Settlement Annuity?
Financial products can be complex, and so it is no surprise that many people are confused by the notion of a structured settlement annuity. This is especially true given the recent surge in ads from companies that buy your structured settlement, offering to cash structured settlements out and pay a lump sum up front. However, given the amounts of money involved, it is important to understand your structured settlement or annuity so that you can make the best financial decisions for yourself and your loved ones.
Structured Settlements Annuities
An annuity is a product whereby one party pays a lump sum to an insurance company, usually a life insurance company, and in turn the company makes payments back at an agreed upon timeframe. In this way they can be used to fund a structure settlement. Structured settlement annuities are used by companies or individuals to save money on court settlements or damage settlements, as they are able to pay a lump sum up front that will be less than the total payout, while the insurance company can invest and generate profit off of the lump sum in order to cover the difference between the payout and the sum, while still ensuring a profit. Additionally, there may be tax benefits in some circumstances to using an annuity to resolve a structured settlement.
What Can I Do With My Structured Settlement Annuity?
Like any annuity, structured settlement annuities can be used to provide income on the schedule agreed upon when the annuity or settlement was made. Additionally, the annuity can also be sold to another party or company for a lump sum of cash up front, though this will be for less than the total value of the annuity. Some structured settlement recipients prefer this as they want to have access to liquid capital, instead of the very illiquid annuity. Those who sell structured settlement annuity may be looking for money for medical bills, to start a business, make home repairs, or just want to have extra cash on hand instead of waiting for the annuity to pay out. If you have a structured settlement or annuity, you should make sure to talk to a certified financial planner or advisor in order to ensure you make the best financial decisions for yourself. This will prevent you from feeling cheated later on in the process. After all, it's your money, so you should do what you determine is best for you!