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How Do Structured Settlements Work?

You may be in a situation where you've recently been offered a structured settlement, for one reason or another. Before choosing how to respond to this offer, you're probably wondering, "How do structured settlements work?" Structured settlement funding can be a complex beast, and understanding how structured settlements work can be daunting. This guide will help you understand how structured settlements work and give you some insight on what you can do with your structured settlement.

The Process of a Structured Settlement

Most people receive a structured settlement as part of a lawsuit or legal settlement. Structured settlement payment structures are different in each case depending on the nature of the situation that resulted in the structured settlement. The parties structure settlements so that payments are made on a certain schedule to coincide with certain times according to the damages, potentially medical bills or life milestones like birthdays. The settlement structure will be agreed upon by both parties and after that point is very difficult to change. The person benefiting from the structured settlement will then receive fixed payments at the specified times. That is, unless they choose to do something else with their structured settlement.

Other Options for Structured Settlements

While many people choose to keep their structured settlements, there are other options. Some individuals may think "I have a structured settlement and I need cash now!" If that is the case they may choose to sell a structured settlement. The price you get for your structured settlement will depend on the structured settlement annuity rates. This means that for those of you wondering "Should I sell my structured settlement payments?" need to find an answer in your financial situation. Make sure to talk to a certified financial advisor or planner in order to help make the best financial decisions regarding your structured settlement. Compared to structured settlements cash is much more liquid, as structured settlements only pay out at the agreed upon time intervals. This means if you have an expense now, whether medical bills, home or car repairs, or something else, you won't be able to access the money in your settlement except on the agreed upon dates for distribution. As a result, some individuals choose to sell their structured settlements for a cash value lower than the total payout of the settlement in order to get access to cash resources right away, instead of having to wait for the structured settlement payout.