Why buy Structured Settlements

Structure Insurance Settlements and how they work

Have you ever thought about companies that buy structured settlements? Advertisements appear daily on television from firms like JG Wentworth, Peachtree Settlement Funding and others.

All of them are encouraging you to break free from the restraints of your structured settlement and seize the opportunity of a lump sum payment.
How do they come up with an amount to offer you? How will their offer compare to simply finishing out the settlement? And why do they do it? The article below takes a look at the answers to these questions.

Companies that buy structured settlements are giving you cash for the future value of your settlement. When they decide how much to offer for your structured settlement, they will assume that tomorrow’s dollar (the money you get in future payments) is worth less than today’s dollar.

So you can’t just add up all of your future payments and expect to receive that in a lump sum. The firm giving you a quote will “discount” the value of those future payments. You will be offered substantially less than the total sum of your payments.

There’s certainly nothing sneaky or illegal about this process. You can see for yourself that the money you have today doesn’t buy as much as it would have years ago.

If the amount of your structured settlement payments are fixed (and most of them are because of tax laws), then any payments you receive in the future will essentially be worth less than they would be today if you could get them today. That’s why your lump sum offer might seem lower than you expect.

Of course, you must realize this: companies that buy structured settlements do so because they will make a profit. If it wasn’t profitable, they wouldn’t do it. So they will pay you a lump sum based on the profit potential of your settlement.

They believe that with the buying power they have on a billion dollars or more of future payments, they will be able to invest wisely and receive a significant return on that investment. Once you receive a cash payment, it will be up to you to accomplish the same thing.

So there you have the basics of buying structured settlements. Firms will calculate an amount that they believe is the future value of your settlement. They’ll make you an offer that may be lower than you want, but probably represents a fair value.

Then the firms will proceed to turn your payments into profit. The picture may not be a happy fairy tale, but at least you’ll know the nitty-gritty details if you’re every ready to sell.