How to Determine the Value of a Structured Settlement Annuity to Receive a Lump Sum

Every business day, individuals across the country receive free quotes to sell annuity for a lump sum of cash. As a highly competitive market, many settlement buyers are offering high bids to purchase annuities that generate a monthly or annual income to the annuitant.

Many individuals have received a structured settlement annuity payment plan as a result of winning a court case involving personal injury, medical malpractice or other legal action. When individuals sue one another there is often a settlement involved where the defendant agrees to make payments in installments. Typically, the defendant will pay a one-time premium to an insurance company that in turn issues an annuity policy for the injured party.

settlement payment plan
photo credit: Joe Gratz via photopin cc

Exchanging Payments for a Lump Sum

With payments provided each month from an insurance company, based on the terms of the structured settlement annuity contract, the beneficiary (annuitant) can cover their medical and living expenses. However, sometimes the monthly or annual payments are not large enough to make a difference in the financial status of his or her life. As a result, they may choose to exchange some or all of the future payments for a lump sum of money.

When experiencing many life changes, or not meeting financial goals, many annuitants choose to sell all or a portion of their annuities for cash at a discounted rate. By receiving a lump sum for the value of all remaining payments, the annuitant can meet all of their immediate financial requirements, purchase a new home/car, send a child to college, or any other critical need.

Following Government Guidelines

Using strict guidelines issued by every state government, many structured settlement transactions are approved by the court system every day. Using a Legal Transfer and Assignment Agreement, reputable settlement buyers and the annuitants agree on contract terms where the beneficiary sells the annuity at a discounted price.

Determining the Value of the Annuity

The amount that will be paid for any structured settlement annuity will be based on three crucial factors that include:

  • The Strength of the Annuity – The strength of the structured settlement annuity is determined by evaluating the probability that the payer (insurance company / annuity company) will make all remaining payments in the full amount and on time.
  • The Amount of Monthly Payments – Determining how many months are left for the payout of the annuity along with the actual dollar amount of each payment will be used to assess the worth of the annuity.
  • The Current Economy – The value of the annuity will also be based on the current financial and economic conditions including interest rates, the cost of money, market conditions, etc.

The structured settlement’s value is usually determined on the amount of time left in payments. All things being equal, any annuity that pays out sooner, rather than later, will generate a higher bid when purchasing the structured settlement.

Selling Only a Portion

Individuals that want to get cash for settlement structure annuities do not need to sell off the entire annuity. Many times, annuitants will keep a portion of their monthly payments to help meet many of the financial requirements they have every month. Others choose to sell off portions of their monthly payments only when a crisis or need arises. Any transaction in selling off a structured settlement annuity can be specifically tailored to the annuitant’s needs. Having access to lump sums of money without disrupting monthly cash flow provides a desirable option to any beneficiary of an annuity.

Most reputable companies that offer to buy a structured settlement annuity do not require any upfront costs. However, there are specific fees that will be involved. These fees are usually deducted from the lump sum amount.

About the Author: William Hess is a marketing professional working for QuoteMeAPrice.com, a company that helps people sell structured settlement payments, annuities or lottery payments.