Selling Structured Settlements For Personal Injury Claims
A structured settlement is an agreement by which a party that loses a personal injury lawsuit (the actual payor is usually an insurance company) agrees to pay the judgment to the winner using payments over a period of time rather than payment in lump sum. This future income stream can if desired sold to a third party in exchange for a lump sum payment. The typical procedure is as follows (details may vary according to state law): (1) The seller sends documentation including information about the insurance company, the amount of the settlement, and the payment plan to the potential buyer. (2) The potential buyer makes a purchase offer. (3) The seller (if interested) sends the potential buyer a copy of his structured settlement policy and the settlements agreement. (4) The seller and the buyer draw up an agreement detailing the proposed transaction.
(5) The seller and the buyer submit the agreement along with an application to the court for approval. (6) The court reviews the documentation and approves the sale as long as it determines that the transaction is in the best interests of the seller. The entire process normally takes a few weeks. An important point to keep in mind is that the price of a structured settlement is always less than the total value of the payments received. Time is money, and a lump sum payment is always worth more than payments over time because a dollar today is almost always worth more than a dollar tomorrow.
Therefore it is important to accurately calculate what is called the “time value of money” in order to arrive at a fair price. This calculation is more mathematically precise than most people realize, and guidelines exist for this purpose. Unless you are a mathematician or an insurance actuary, it would be a good idea to seek professional assistance for this purpose.
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