Structured settlements were introduced in Canada and the United
States in the 1970's. They were introduced as an alternative to lump sum
payments, common in insurance settlements and lottery winnings. In the
decades since, they have also been accepted as legal financial
instruments in England and Australia. The aforementioned common law
countries have decided to include structured settlements in their
statutory tort laws. These four countries handle tort law and the
settlement packages a little bit differently, but the general overall
definition applies across the board. In a nutshell, a structured
settlement by legal definition is a statutory agreement to pay a
specified sum of money over a period of time, on a payment system.
Payment Arrangements
When
someone wins a court settlement (or if they settle the case
beforehand), the insurance company often gives the winner a choice of
taking a specified amount of money in a lump sum, or a bit more money if
the insurance company can enter into a structured settlement
arrangement. Of course, it is in the insurance companies best interest
to pay the claimant in a structured settlement, because the insurance
company can earn interest, during the structured payment cycle, on the
full sum of money it would have paid in a lump sum.
The
insurance company wins in the profit game, when they get to enter into a
structured settlement. They will be able to invest the full sum of
money owed, and they get to earn interest or dividends on the money in
hand during the payment period.
Structured settlements are
most often paid out in the form of an annuity over a period of time. An
annuity is also legally classified as a financial instrument. Once
again, the financial institution will gain an additional financial
advantage, because they can collect interest or earn other kinds of
income on the bulk amount, during the payment period.
Annuity & Structured Settlement Buyouts
Structured
Settlements for a great deal of clients are the ideal solution.
Payments spread out over a period of time allow clients to balance their
finances and pay bills in the years to come. Some people get their
settlement payments $300, $1000 or even more each month. Sometimes they
may include lump sum payments many years in the future. This is fine as
long as their life is humming along and their bills are being paid. Yet,
circumstances sometimes get in the way, and people need the lump sum
cash right away to solve some issue that has come up in their lives.
Because
both annuities and structured payments are a legally-binding financial
agreement, those items can potentially be transferred to another person
under the terms of the laws that have been set up to manage these
financial products. But, when faced with a serious financial crunch,
some people hastily sell their annuities and structured settlements to
the first company who would be willing to buy them for a lump sum
amount. These companies who are willing to buy-out annuities and
structured payments are commonly referred to as "Factoring" companies,
because they use "Factors" to determine how much future payments are
currently worth, and how much they should buy them for.
The Standard Method of Selling A Structured Settlement - Persistence and Patience (not always used)
We
have all seen the countless ads on TV from a various companies, "Get
Lump Sum Cash Now." For years, people have turned to factoring companies
in their time of financial need. Smart consumers will learn from the
insurance companies. Have you ever been involved in a car wreck? The
insurance company requires for you to get three estimates and then they
will pay the company that offers them the best deal.
The smart
consumer will also invest a little bit more of his or her time to make
sure they get the best deal for their annuity or structured settlement.
They will call at least three factoring companies and get competitive
bids from each. Then they will go back to the three aforementioned
companies and see if any are willing to beat their best offer. It can be
tiring and time-consuming to follow through in this process, but for
the average person, it could be worth several thousand or even tens of
thousands of dollars in one's bank account at the end of the process.
The Better Method of Selling a Structured Settlement - Open Marketplace Auction
A
new service has been introduced by Quote Me A Price.com (QMAP). This
website allows Structured Settlement owners the ability to list details
of their payments, and receive cash bids directly from Top-Rated Funding
firms. The process is relatively simple. Clients sign up for a free
account and list the details of the payments they receive. Once an
account is created and the details of the payment arrangement are known,
Funding Firms can log in and make cash bids directly on the purchase of
the settlement. Each firm can see the current highest cash offer, and
if they wish to beat it with a higher cash price, they can do so.
Sellers do not need to worry about being called countless times by
salespeople because the contact information of the settlement owner is
not shared. When a factoring company makes a cash bid on the settlement,
QMAP notifies the settlement owner of the new bid via email. Having
settlement buyers compete in an open marketplace lowers the profit
margin for funding firms, and forces the lowest possible discount rates
to be applied when funding companies compete to buy future payments.
This in turn ensures that clients can get the maximum amount of money
back from their settlement.
The Importance of Comparison Shopping (actual Quote Me A Price.com client)
Two
siblings had been receiving separate, but identical annuity payouts in
the form of a structured settlement from an accidental family member
death. Sibling one got into a financial crunch. When this happened,
sibling one called a "Factoring Company." She was offered a lump sum
buyout, and although the offer was much lower than the value of the
settlement, sibling number one didn't realize the importance of shopping
the competition, and sold her settlement for $70,000. Sibling number
two heard about the buyout and thought that it would be nice to have her
cash now also. But, sibling number two was not as desperate for an
immediate buyout. Sibling number two took the time to shop around for a
better deal. Sibling two managed to uncover Quote Me A Price.com, and
they helped to secure the best offer possible. Sibling number one got a
$70,000 buyout and was initially happy with her cash buyout. Sibling
number two came to QMAP with the same initial $70,000 buyout offer for
the settlement. After working with QMAP, sibling number two got offered
$100,000 for the same settlement sibling number one sold for $70,000.
Sibling number two sold her settlement for $100,000 to JG Wentworth who
is an auction partner in the QMAP service. While sibling number two did
get the best possible deal, sibling number one unfortunately has to live
with the fact knowing that she made a $30.000 mistake by not shopping
the competition.
In Conclusion
Your structured
settlement or annuity is the foundation of your financial future. If you
find yourself in financial need now, you should at the very least give
yourself a couple more weeks to shop your deal to the competition. You
might be telling yourself that you cannot afford to wait, but the truth
is that you cannot afford to take the first bid that you are offered. In
some cases, jumping at the first offer could be the equivalent of
financial suicide to a structured settlement owner.
So, be
patient and persistent in the process of finding a buyer for your
settlement. And remember, if you are willing to negotiate with a car
dealer on the price you pay for a car, then there should be no reason in
the world that you should not negotiate with a factoring company when
you are looking for a buy-out of your settlement.
