If you’ve ever been injured in an accident, you may have received a structured settlement. Structured settlements are payments made to injured parties in a series of installments rather than one lump sum. They are usually arranged through a structured settlement company. This blog post will discuss what structured settlement companies are and how they work. We will also look at the pros and cons of using a structured settlement company.
What Is A Structured Settlement Company?
A structured settlement company is a business that specializes in providing financial services to individuals who have received compensation for an injury. The most common service they provide is arranging payments over time through annuity contracts. These companies are regulated by state or federal law, depending on where the claimant lives. They may also be subject to government oversight by agencies like the SEC in some cases.
History of Structured Settlement Companies in America
Since the late 1970s, structured settlements have been used to help people who have suffered from injuries or other losses that make it difficult for them to work or support themselves financially. They are typically arranged through an attorney, but they can also be set up by individuals or even businesses that want to provide compensation for a loss without paying out all at once. The first significant use of structured settlements occurred in 1976 when Philip Morris reached a settlement with two states over health-related issues caused by cigarette smoking.
How Structured Settlement Companies Work
A structured settlement company works with a settlement holder to sell a portion or all of their settlement payments. A settlement buyer like J.G. Wentworth will purchase the portion or entire settlement and charge a fee. The amount that an individual receives for their settlement is based on several aspects, including current interest rates, length of the payout, how long the individual has already received payments, etc.
A structured settlement company works by entering into a legally binding agreement with an insurance company. The structured settlement company is then responsible for paying a beneficiary their money in a stipulated amount at certain intervals. This arrangement ensures that the beneficiaries get their money and are able to plan better for their financial futures.
Structured Settlement Companies Pros and Cons
Pros: Structured settlements are often recommended for people who have received large sums of money following an injury or other loss. It allows them time to adjust their lifestyle before receiving more payments each year. Annuities can provide income throughout retirement years, which may help cover living expenses like medical costs and housing bills during this period. For example, if you receive $500,000 from an injury claim but only need $25,000 per year to live on, then you could invest the remaining money into an annuity that pays out monthly or annually.
Cons: There are some drawbacks if you choose to use a structured settlement company. The biggest one is that they often charge fees for their services; these can range from 15% on up (or more). Also, if you decide not to accept the terms of your contract with them after signing it–for example, by selling off part or all of your future payments–then this may result in penalties such as having to pay back some money already received under the agreement. Another con would be that if something happens where one party needs funds quickly but doesn’t have access to liquid assets right away, then they might need an alternative way out before time runs out.
In short, structured settlement companies provide a valuable service for those who have received large sums of money as compensation for an injury or other loss. They can help individuals manage their finances and ensure that they receive regular payments over time. However, there are some drawbacks to using these companies, so it’s essential to understand before making any decisions.