What are structured settlements?
A structured settlement is a type of payment used by an insurance company to pay for the settlement of a personal injury, medical malpractice, or a wrongful death claim. The total amount of the compensation is not handed over right away; instead, it is made in payments that can vary in amount, duration, and frequency. They can be once a month, once a quarter, yearly, or a mix, and every payment structure is different.
These payments are helpful though they might not always align with the person’s current needs getting them. For instance, you may be receiving annual payments, but you have monthly rent to pay, or you need to make a down payment on a house, but you are stuck with monthly payments even though you know you have got larger payments coming ten years down the line. One thing not known by many is that you can sell your future payments and get money for the things you need now, and if you are considering doing that, it is essential to pick the right company to work hand in hand.
Things to know when selling structured settlements
- Research different companies and compare to see which company offers the most favorable terms.
- Carefully read the agreements before signing. Ensure you fully understand every portion of the agreement first, then sign.
- Consult with a financial advisor. You can hire a financial expert who has handled such cases. The financial advisor will advise you if selling all or part of the structured settlement makes financial sense in your particular situation.
- Judicial approval is required to sell structured insurance settlement payments.
- These types of transactions offer flexibility in that you can sell part of the structured settlement or decide to sell the whole settlement.
- Selling part of the settlement makes much financial sense in certain circumstances, like having an urgent expense.
How to sell a structured settlement step by step
Step 1: Evaluate your needs
Evaluate your needs by deciding how much money you need and how much of your structured settlement you want to sell for you to meet this need. Here, keep in mind that the total dollar amount of the payments you would receive overtime will be higher than the amount you will get from a company that purchases the rights to the payments. This is because the company will have administrative and legal costs, considering that it exists to make profits.
Make sure you dot sell too little because you might have to start the process again and appear before a judge a second time, to get additional funds which may lead the judge to doubt your ability to handle your finances hence declining to approve the second transaction.
Step 2: Get different quotes and compare.
Contact several companies that can purchase quotations, and this will give you a clear idea of how much the companies can pay for your payments. Getting different quotes will give you the confidence you need to choose the right company to sell your settlements to. Investigate the companies until you are satisfied that they are reputable.
Step 3: Select the best company
Choose the best offer and sign the paperwork. Here, you will have agreed to sell your payments.
Step 4: Request an advance.
This applies to those who need the money immediately. It will be a partial payment to take you through as you wait to complete the process.
Step 5: Appear before a judge.
This is done to get the court’s approval. Here, the factoring company that you chose will make all the arrangements and prepare the paperwork for you to appear before a judge.
Step 6: Get your money.
As specified in your agreement with the factoring company, you will receive full payment. This usually happens within three to 5 business days after the court’s approval. It is critical to note that if you owe any past tax liens, they will be subtracted from your lump sum before receiving the money.