If you’ve been involved in an automobile accident and the personal claim is large enough, insurance companies want to give you what’s called a structured settlement. Structured settlements are payments made to you over a period of time. For example, if you’re car accident claim was $25,000, the insurance company paying the claim will give you monthly installments for a predetermined period of time, and there is a good reason why insurance companies do this. And it’s not just insurance settlements, but can also be applied to lottery winnings.
Insurance companies don’t want to lose any money. They don’t want to have to dig into their bottom line. When insurance companies receive payments from their clients, those payments are invested in government securities, stocks, bonds, mutual funds, and nearly any other kind of investment. Now, insurance companies make money from their investments commonly known as interest. There is a principal amount of money and interest accrues as the principal sits over time. When an insurance company pays you an annuity, they’re generally paying you with interest from their investments. Paying in monthly installments (annuities) allows the insurance company not to lose any principal value from their investments.
There is what’s called annuity companies that will allow you to sell an annuity to them. They will in turn give you a lump-sum of money and assume responsibility for collecting the annuity. This is a viable option for those of you who may need cash instantly. Some reasons people do collect lump-sum cash is to make a down-payment on a home, pay college educational costs, or pay off any outstanding debt.
Currently, more than 30 state governments have determined that individuals should have access to this kind of resource, and to allow for transfers of the annuitant’s rights to receive payments when it is determined to be in their best interest. Individuals in all 50 states have access to their annuity payments when financial needs arise.
If you’re just finding out information on how to sell an annuity, and you are currently a structured settlement recipient, there is hope for you to sell a partial amount of your annuity. Many companies will allow you to sell the remainder of annuity for that lump-sum we mentioned above. The annuity companies will just take over remaining payments for the life of the annuity.
The process to sell an annuity can take as long as six months. Don’t be fooled by companies saying they can have everything settled in under three months. There are documents to be filled out, phone calls to make, court appearances to make, and it just takes time, so be prepared.
Now, a little on the amount of the lump sum you may receive. If you received a settlement for $100,000 and that money is to be paid out over the next 10 years, you can sell the annuity and receive $50,000 to $80,000 immediately. Annuity companies will usually keep between 50 and 80 percent of the structured settlement. That’s where they make their money. But the nice thing is you do get a substantial amount of money immediately.
It’s important to do research on annuity companies before you consider making a commitment to sell an annuity. Weigh the pros and cons of selling an annuity and make the decision that best suits your needs and financial circumstances.
By John Ivie