A structured settlement is an agreement between a claimant and a defendant wherein the latter is obliged to pay the claimant compensation over a personal claim. The total amount may be too exorbitant for the defendant to pay as a lump sum, and thus it is decided after a formal agreement to be paid in the form of an annuity.

There are different types of payment options in a structured settlement, and these mainly depend on the needs of the payee. The options pertain mainly to the timing of cash flow- yearly or monthly, and also whether the money is sent directly to the payee, or to a trust set up for this purpose, or transferred electronically to the payee’s account.

The most common mode of payment is the lifetime annuity that provides the payee a structured income for the duration of his/her lifetime. For payees with special funding requirements, a differed lump sum payment works well. There are other types of payments like step annuities, percentage increase annuities, period certain annuities etc, each with a specific payment option for amount and duration.

Depending on the financial needs of the claimant and his/her future requirements, the two parties can find a payment plan that fits well for them.

When deciding to sell your structured settlement to a company in order to receive some lump sum cash, do consider some factors carefully before actually doing so.  A periodic payment module guarantee some level of financial security and tax benefits, and the decision to sell it must be taken with care.

Buying property, car or paying off a mortgage are common reasons why people choose to sell their settlement. Some people consider investing the cash obtained from the settlement in stocks or bank. If cashing out the settlement allows you to buy a house, it could well be worth it. Similarly, talking to a broker regarding the stock options would help decide if it is a viable option or not.

There is always a risk in losing some money when selling; this is because the deal needs to cover for the risks involved in the purchase for the buyer. If the losses are considerable in comparison to a periodic payment, it might not be worth it. Also, every buying party will try to buy out the settlement at the lowest payout possible.

Thus, selling a stable settlement needs great deal of thought and the claimant should feel happy with all conditions before committing to sale.

How It Works?

There are companies and financial institutions that purchase structured settlement from claimants; they do so for the purpose of investment. Some people having substantial settlements may also sell part of their whole structured settlement to a company when in need of a quick cash.

When to Opt for Cash for Structured Settlement

Upon winning a lawsuit, a claimant is awarded a substantial amount of money to be paid in form of a life annuity. Rather than waiting to receive money in installments and on the terms of the defendant party, the claimant may like to obtain some bulk money upfront. Winning a large draw prize also more often than not leads to a payment in parts situation,and the winner can opt to sell the annuity and obtain cash for the annuity.

Opting for cash in lieu for the original structured settlement can be beneficial to a claimant depending on his/her life’s situation, though all pro and cons must be looked at beforehand.