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What Are My Options for Selling My Payments?
Once you decide how much money you need, you can opt to sell the entire value of the annuity, a portion of the total value for a lump sum, or a specific portion of a specific number of payments.
Selling the full value of your annuity contract liquidates the asset. This eliminates all future income payments. However, you’ll have access to the full amount you agreed to with the buyer.
If you decide to sell only a portion of your payments, you’ll continue to receive periodic income and retain the tax benefits. In the event you need immediate cash, you can sell some payments in exchange for a lump sum. For example, you can sell years one through four of your annuity payments for a lump sum. After the four years have passed, periodic payments will resume.
Similar to a partial sale, a lump-sum sale allows the annuity owner to sell a portion of their annuity payments in exchange for a lump sum. This means they receive a specific dollar amount, which will be deducted from future annuity or structured settlement payments.
How Much Will I Receive for Selling Annuity Payments?
Selling an annuity is a business deal. Factoring companies intend to profit from their purchases. This means you’ll be offered less than the total worth of your annuity.
Account for the Discount Rate
The difference between what your annuity is worth and what you’ll receive in cash is called a discount rate. According to various reports, the average discount rate ranges from 9 percent to 15 percent. And it’s not unheard of to encounter even higher percentages.
The discount is essentially the tradeoff for the ability to tap into your money immediately.
Factors that can influence your discount rate include:
- Total value of payments you are selling
- Number of payments you are selling
- Dates the payments will arrive
- Current economic conditions
- Interest rates set by the Federal Reserve
- Fees and extra charges
In rare cases, people have received as little as 50 percent of the value of their contract.
For this reason, it’s important to be savvy about your sale. Have a legitimate reason to sell; know exactly what you need; and err on the conservative side when selling payments. You can always sell additional payments later.
We also recommend shopping around for the best quote and reviewing the offer with a reputable advisor before choosing which company to work with.
Consult with a Professional Before You Accept an Offer
Although it may cost you a little bit of money, sound advice from your lawyer or financial planner may save you thousands of dollars during the selling process.
Your advisor can warn you about a low-ball offer or save you money in taxes.
They can also clear up confusion about the process or explain misleading terminology, such as the fictional “structured settlement loan” that some companies use when referring to the sale of payments.
The Legal Process for Selling Structured Settlement Payments
In contrast to selling annuities purchased through insurance companies, selling the rights to structured settlement payments is a legal process that requires court approval.
Offering another layer of protection for sellers, Structured Settlement Protection Acts — the state and federal laws that safeguard the rights of settlement holders — govern the practices of purchasing companies.
More information on how to sell your structured settlement and the legal implications:
Annuity Sales Don’t Need Court Approval
If you purchased or inherited an annuity, the selling process is less complicated. No court approval is required in these situations. The sale is simply a matter of an agreement between you, the buyer, and the insurance company.
The insurance company handles the paperwork, and the buyer can answer questions specific to the transaction. The whole process takes roughly four weeks.
6 Cited Research Articles
- Consumer Financial Protection Bureau. (2018, February 2). What should I know before giving up my monthly disability, personal injury or structured settlement payments in exchange for a one-time lump sum payment? Retrieved from https://www.consumerfinance.gov/ask-cfpb/what-should-i-know-before-giving-up-my-monthly-disability-personal-injury-or-structured-settlement-payments-in-exchange-for-a-one-time-lump-sum-payment-en-2025/
- Larson, A. (2018, May 7). The Structured Settlement. Retrieved from https://www.expertlaw.com/library/personal_injury/structured_settlement.html#selling-a-structured-settlement
- U.S. Senate. (1982, September 8). Federal Periodic Payment Settlement Act in 1982. Retrieved from https://www.finance.senate.gov/imo/media/doc/srpt97-6461.pdf
- U.S. Securities and Exchange Commission. (n.d.). Annuities: What Are Annuities? Retrieved from https://www.investor.gov/introduction-investing/investing-basics/investment-products/insurance-products/annuities
- U.S. Securities and Exchange Commission. (n.d.). Pension or settlement Income streams: What You need to Know Before Buying or selling Them. Retrieved from https://www.sec.gov/files/ib_income_streams.pdf
- Wood, R. (2019, June 26). How Lawsuit Structured Settlements Work. Retrieved from https://www.forbes.com/sites/robertwood/2019/06/26/how-lawsuit-structured-settlements-work/#6a930c3552e7