These days when someone is awarded a cash settlement in a lawsuit, it is rare to receive a lump sum of cash. Insurance companies, being the main companies making these settlements, would much rather award a structured settlement. This means that instead of receiving the cash all at once, it is instead spread out over many years with monthly payments.
As a result of this structure, the company paying the settlement is better able to pay out those funds and the recipient is forced to be more responsible with that money. A similar structure exists with lottery payments and annuity payments.
Unfortunately there are times when the recipient just really needs some of that money upfront. So in this case they may turn to the various companies that buy future structured settlement payments. For a discounted rate, these companies bid on structured settlement payments. Then, provided that the court agrees with the reason to sell the payments and the price being offered, the seller gets a lump sum payment.
With that layer of protection provided by the courts, it is a lot more difficult for people to just recklessly spend any structured settlements. Since those payments are often meant to replace a person’s income, that is usually in their best interests.
One of the most common reason people choose to sell some structured settlement payments instead of accepting the annuity is because they’ve fallen on tough times and want to pay off some debts. The alternative for them would be getting harassed on the phone by creditors or building up more debt with a personal loan.
Then there are times when someone wants to buy a house. With the current real estate market, the prices may be too tempting to pass up. Even with the structured settlement sale discount, this might end up being a good investment. Plus there is that certain level of satisfaction that comes from owning your own home.
A home isn’t the only investment that some people choose to pursue when selling structured settlements. Sometimes the seller really wants to start a business or pursue another kind of investment. These are the ones that are a little more questionable since there may be too much risk involved. Still, the person should have a right to sell their payments if that is what they want to do.
Hopefully you are never in a situation where you have to go to court and end up with a structured settlement. If you do, at least you have the flexibility to sell some of those structured settlement payments if you choose to do so.
Recent Posts from Modest Money
- How to Get a Car Loan on a Temporary Work Visa in Australia
- Underperformance in Gold Stocks Argues for Interim Peak
- Economic Events Blamed for HSBC's Disappointing Earnings
- Aytu BioScience’s (AYTU) “Natesto” to Target Low Testosterone
- 3 Tips for Flipping Houses