It has become rather common nowadays for insurance companies to award a structured settlement to an accident victim in lieu of a lump cash sum. The structured settlement serves a variety of purposes and can be awarded for a variety of reasons.
Obviously, if the insurance company only needs to pay a small amount of money monthly or annually, they can keep the remainder of the settlement invested which is immensely profitable. For recipients who are financially savvy, they would much prefer to be the ones earning the interest on their settlement money. After all, it’s your money – why should the insurance company be earning revenue off of it and dishing out a small portion to you each month?
However, another idea that is talked about is that a structured settlement is helpful to people who have a lower income and who are not financially responsible. The monthly or annual payments ensure that someone like this has a source of income at all times. The worry here is that someone may waste the money on purchasing things that offer no form of financial return. For the financially initiated, this idea is a confusing one.
The problem is that if you’ve never had the opportunity to learn about finances, the idea that you could have your cake and eat it too seems too good to be true. But, in reality, if you make the right investment choices and exercise patience, it would be possible to turn a lump sum into a regular income that would allow you to make the same desirable purchases. This same process would allow you to recover the losses of selling your structured settlement for a lower percentage of the full settlement’s value.
The selling of structured settlements at a significant reduction of the total value has become a very popular practice. The main reasons for this are the recession and the need, or desire, for a large amount of cash.
When someone is swimming in credit card debt, it’s easy to see why they would prefer to have a lump sum to get themselves back on track. However, even if you chose to sell your structured settlement, going off and paying off all of your debt may not be the right move. For those who are uneducated in the arts of finances, this may seem ridiculous – but the reason is simple and easy to understand when explained properly.
If you are paying a particular amount of interest on a credit card bill each month, you may be able to make an investment at a higher rate of return. If this proved to be the case, you could make the payments on the credit card each month with the returns from your investment and still end up with extra spending money. While the money is in your possession, it can be used to work for you.
Once it is gone, you may be debt free, but you are limited on your income streams. When selling a structured settlement, it’s important to do your homework and make a solid plan for the money long before you have it in your hands. Certain factors, such as the stress associated with living with excessive debt, can cause people to make rash decisions.
Don’t allow yourself to fall into the trap of making financial decisions while under the influence of powerful emotions. Each one of these decisions will shape your financial future and should be made with care and cold rationality.
Okay, so if you’ve made the decision to sell your structured settlement. What now? Companies that purchase structured settlements seem to be everywhere. They clearly spend a lot of money on advertising campaigns on television, radio and on the internet. If you are considering selling a structured settlement, you are likely confused about which company you should go with.
So, how do you make the right decision? The real answer to this question is simple: shop around. If you can avoid declining an offer made to you by a company, do so. Get as much information as you can about what offers are available. You can also do some homework to determine what kind of percentage pay-outs other people have gotten. There’s no rush, so take your time and exercise patience. It will be worth it in the end.