Buy Structured Settlements
Are you looking for a worthwhile investment opportunity? Search no more! Seasoned investors have a knack for identifying high-profit, low-risk opportunities. It may sound strange to mention “high-profit” and “low-risk” in the same breath. Nonetheless, this is what you get when you buy structured settlements. Investing in structured settlements is a fantastic business that is fast gaining interest. In this article, we will explore how you can leverage this business to achieve financial independence seamlessly.
Buy Structured Settlements: What Are They?
You cannot buy structured settlements when you do not know what you want to purchase. Hence, it makes sense to start this discourse with the description of structured settlements. A structured settlement comes to fore mostly when a plaintiff wins a case in the court. It is compensation for personal injury due to medical malpractice or other harmful activities. The payment covers the plaintiff’s damages over a specific period. Structured settlements have been in place since the passing of the Federal Periodic Payment Settlement Act by Congress in 1982.
More so, the arrangement is unique for different cases. It often coincides with certain vital ages. For example, most parts of the structured settlement for an injured child might be after the child turns 21. Nevertheless, in the case of an injured 45-year old adult, the structured settlement may include annual payments for 20 years. The adult may then get a lump-sum when he turns 65. Structured settlements have special considerations and privileges. For example, the government does not require claimants to pay taxes from the proceedings of the payment.
Moreover, claimants are free from tax even when the payment earns interest. Having the plaintiff wait for decades or more years on the defendant to make payments is risky. To mitigate this risk, the defendant’s professional liability insurance company often steps in. The company will buy an annuity from a reputable insurance company to comply with the payment. This approach enables defendants to resolve their end of the payment with a single lump sum.
Buy Structured Settlements: Why Are They Sold?
It is not possible to buy structured settlements when no one wants to sell them. Therefore, we should talk about why people sell their structured settlements. Structured settlements offer a stream of stable income for the claimants. Hence, it is baffling that anyone will want to sell them. Besides, when people sell their structured settlement, they have to let it go at a discount. Therefore, putting a structured settlement up for sale means that the individual earns less than the total value. Nonetheless, people sell their structured payments, especially in the face of harsh economic conditions.
More so, people sell their structured settlements for reasons such as paying medical bills and affording a divorce. In some cases, people put up their payments for sale to fund a new business. The common factor is an urgent need that demands instant cash. During such instances, claimants often sell their structured payments at a discount to cater to the need. The process is not often straightforward because it is sensitive. The sale of a structured payment can make the claimant vulnerable in the future. Hence, there are federal and state laws that protect the rights of sellers.
Furthermore, claimants cannot sell their structured payment without court approval. They will have to appear before a judge who will review the deal while considering various factors. The judge will cancel the agreement if it is not in the best interest of the person. Approval of sale also depends on the buyer’s reputation. If the deal involves a buyer that has a reputation for exploiting claimants, the judge will strike out the sale. It is after a judge’s approval that the seller can go ahead with the sale.
Buy Structured Settlements: Who Can Buy Payments?
Due to their sensitive nature, not everyone can offer claimants a lump-cash to buy structured settlements. Structured settlements buyers are called “factoring companies.” These organizations provide a lump-cash in exchange for the right to structured settlements. Many of these companies are at different locations across various states in the US. When claimants want to put their structured payments for sale, they contact these companies. Sellers often consider factors such as bankruptcy history, number of rejections, and payment processing speed before choosing a buyer.
Then these organizations offer sellers structured settlement quotes. These quotes contain the discount rate and what the company is willing to offer. Factoring companies are different in their approach to business, but their operations are similar. For example, their customer services and speed of payment processing differ. When sellers find a company with the best offer, they agree to sell their structured settlements. However, the deal cannot go through until the claimant appears before a judge. Factoring companies often avoid attempting to buy structured settlements involving minors. It is not likely that the judge will approve the sale except in very critical situations.
After the court’s approval, the company will notify the seller’s insurance company about the sale. The company will process the payment, and the seller will get it after completing the process. In some cases, the company will offer the client some part of the payment when urgently needed. The seller will then get the remaining portion of the payment when the lump-cash is ready. The whole process often takes between 40 and 90 days before completion. Therefore, it is not advisable to initiate it if there is an alternative means of meeting the need.
Buy Structured Settlements: Legalities
Before exploring how profitable it is to buy structured settlements, it is better to talk about the legalities first. If investing in this business can put you in trouble with the authority, you should avoid it. The good news is that there is nothing wrong with buying structured settlements. It is a legal business, just like buying bonds and shares. When factoring companies purchase structured settlements, they plan to sell them and earn more. Unlike the deal from a claimant, there is no need for the approval of a judge in this case.
The arrangement of structured settlements is from the unique circumstance of the plaintiff. Therefore, no structured settlement is the same as the other. One payment may offer $2000 monthly for the next 15 years. Another arrangement can offer $100,000 in 10 years and another $100,000 5 years later. In such an agreement, there are no intervening payments. Some payments give the claimant a $100,000 lump sum after ten years. Meanwhile, the plaintiff gets a series of $1,000/month payments before the final lump sum.
Regardless of the arrangement, what matters is to find a reputable annuity organization that you can trust. Make sure that you do your homework on the company before you choose it. Ensure that you are clear with the terms before you sign the contract. If it is the first time you want to buy structured settlements, ensure that you speak to financial experts. You should contact an attorney in your state for more information on the legalities of the deal.
Buy Structured Settlements: Why Invest in Them?
Most structured payments investors do it to diversify their portfolio. Some people find this industry controversial and aggressive because of ads encouraging claimants to cash in immediately. Nonetheless, investing in structured settlements is lucrative. It offers between 4 to 7% return depending on the discount you get from the seller. Besides, you can buy structured settlements from highly regulated insurance companies, which make the risk profile attractive. Therefore, this investment opportunity perfectly combines profitability with a low-risk profile.
Furthermore, high returns and low risk are two lethal combinations an entrepreneur cannot ignore. Only a few businesses combine these two, and that is why many people will grab this opportunity. When you buy structured settlements, it is different from investing in the stock market. Structured payments are not based on projections that you are not sure how much you will get and when. These are court-ordered contractual agreements. You can know what is in it for you and the duration when you buy structured settlements.
For example, if a structured payment offers $200,000 in 10 years and an additional $100,000 5 years later. Then, you may need to invest $170,884 today to earn $200,000 in 10 years and another $100,000 in 15 years. If you do the math, your earnings equate to a 5% internal rate of return. So, you can know what you will earn within a period from your investment. Note that you will not get any ongoing 5%/year payments. The 5% return is the value of how much your money will grow over time.
Buy Structured Settlements: How to Buy?
Note that structured payments are independent of the plaintiff’s survival of the term of the agreement. So, it is better to buy structured settlements rather than invest in life contingent annuity. Nonetheless, there are risks involved when you buy structured settlements. Therefore, it is crucial to be careful. The following tips will enable you to make quality investment decisions:
Leverage Self-Directed IRA
You can provide diversification to your retirement accounts when you buy structured settlements within a self-directed IRA. Since an insurance company makes structured settlement payments, the risk profile is fantastic. There is no interest rate risk, unlike ETFs and bond mutual funds.
Research the Insurance Company
It is not commonplace to find insurance companies that back structured settlements. Such companies usually have high ratings and are often reputable. Nevertheless, you should research the company before you buy structured settlements. You cannot be too careful as an investor.
Be Ready to Wait
Besides doing your homework on the insurance company, you must be patient when you buy structured settlements. You have no business investing in structured settlements if you are not doing it for the future.
Buy Structured Settlements: Common Problems
Many people prefer to invest in stocks and shares rather than buy structured settlements. Below are some of the common issues with this market that you need to know:
Despite the high returns and risk profile of structured payments, the market is not competitive. This lack of competition is due to the illiquidity of the market. Not many people are willing to wait for 10 to 15 years to earn profits from their investment. Nonetheless, this low competition is good for the market because it increases the discount rate. Sellers are willing to sell at high discount rates because they know that buyers are few.
Difficulties in Finding Buyers
Before you buy structured settlements, you must be sure that you will not want to sell it off. Buying structured payments is a long-term investment that requires you to be patient to earn good returns. However, if you need to sell your structured payments, it may be a bit tricky to find buyers. It is not a pleasant situation when a buyer becomes a seller. You will have to settle for less and will run at a loss. Therefore, you need to consider if you are willing to wait to earn profits before you buy structured settlements.
Although investing in structured payments is a low-risk venture, it is not risk-free. Usually, the insurance companies that back structured payments are the most reputable. Nonetheless, only death is inevitable in life. There is a chance that insurance companies suffer losses during very harsh market conditions. Hence, investors can still lose their money if things go wrong.
You do not have to be a financial expert before you can buy structured settlements. Nonetheless, you should not be a novice so that you will be able to make informed decisions. The quality of your decisions depends on the information you have. So, do not hesitate to contact experienced financial experts that can guide you during the process. The competition is low, and any investor that enjoys long-term investment can leverage this opportunity. Keep exploring business opportunities that can help you achieve financial freedom. Invest in structured settlements to be a part of a business that offers high-profits and low-risk.