Key Takeaways

  • Before beginning the five steps to selling your annuity, confirm its your best financial option. A company’s discount rate guarantees you’ll be receiving less than if you kept your original scheduled payments. 
  • Due to their legal status, structured settlement annuities require an additional step compared to selling a commercial annuity. 
  • You should always compare quotes from at least two factoring companies to avoid lowball offers. 

Before breaking down each step with tips, review the simplified instructions to selling payments below. 

5 Steps to Selling Your Annuity

  1. Research annuity buyers for the best service.
  2. Receive a quote.
  3. Consult with a financial planner and accept quote.
  4. Complete the required paperwork.
  5. Receive your money.

If you’re looking to sell your structured settlement payments for cash, there’s an additional step. Because of their legal status, selling structured settlement payments requires court approval. 

Structured settlements are periodic payments negotiated in personal injury and wrongful death cases to compensate for the plaintiff’s loss.

If you need immediate money from your structured settlement, you can select a purchasing company — also known as a factoring company — to buy all or a portion of your future payments in exchange for a lump sum of cash. Make sure to explore all of your options, like a partial or lump-sum sale, before starting the selling process. 

Since annuities are purchased from an insurance company, you can surrender your contract or sell your payments to a third-party company without court approval.

It is important to have a clear plan for the cash you receive from selling your annuity payments. That plan should address the transfer of risk (market and longevity) from the insurance company to you and any potential tax consequences.

Step 1: Do Your Homework and Research Buyers

Don’t consider a factoring company just because they have a big name. There are many online tools to help you verify if a buying company is trustworthy.

Resources for Researching Annuity and Structured Settlement Buyers

  • Check the company’s financial strength ratings from credit rating agencies, like AM Best or Fitch Ratings. A company’s financial strength indicates its ability to pay claims made by policyholders. It’s generally best to consider companies with a rating of A- or higher.  
  • Confirm the company’s complaint index score. The NAIC publishes company complaint index scores annually, which indicate if the company has a high or low level of complaints. Look for a company that has a complaint index score of one or lower, which indicates a minimal number of complaints. 
  • Look at online reviews and ratings from the Better Business Bureau. Look for a company with positive reviews. The Better Business Bureau helps facilitate the resolution of customer complaints, so it can give you a better idea of the company’s conflict management. 

You can also ask for advice from an accountant or financial planner. Do all that you can to find a reputable buyer available to answer your questions.

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Step 2: Consult a Representative and Get a Free Quote

After you’ve identified several buyers, start making phone calls. Speak with customer service representatives who explain your selling options in an easy-to-understand manner. Ask each company for a free quote.

Other Questions To Ask After Receiving Your Quote:

  • Can I change my mind about selling my annuity payments?
  • Are there any additional fees with selling my payments?
  • How long will the selling process take?
  • What documents do I need if I choose to sell my future payments with you?
  • When does my free quote expire?

Talk to at least two purchasers and compare quotes. Verify what they tell you with your own research.

You can also contact partners to find out how much your structured settlement or annuity is worth. We can recommend reputable buyers.

At the end of the day, don’t let anyone pressure you. Take your time, explore your options and make the best decision for you and your family.

Pro Tip

Feel free to tell potential payment buyers that you’re getting quotes from multiple companies. You may get a better quote if a company knows you’re looking for the best offer.

Step 3: Consider and Accept an Offer

Evaluate your offer, compare it to others and accept the best one.

You can generally expect a discount rate between 9% to 18%, according to the National Association of Settlement Purchasers. Your discount rate is determined by several factors, such as the length of your annuity and the amount you want to sell. A company’s discount rate guarantees you’ll be receiving less than if you kept your original scheduled payments, so make sure you get the lowest rate possible. 

The lower the discount rate, the more you’ll benefit since your payments will retain a greater cash value. The higher the discount rate, the more the buyer will benefit.

If you’re not pleased by your discount rate, you can always negotiate to lower it. 

Pro Tip

If you’re cashing out a commercial annuity, selling some payments to a factoring company on the secondary market could be a much better deal than withdrawing money. Withdrawing funds can cost you surrender charges and tax penalties, depending on your age and how long you’ve had the annuity.

Step 4: Complete Paperwork

The buyer and your insurance company will process the paperwork for the sale of a commercial annuity. Once you’ve completed the documentation to transfer the ownership and payee designation to the buyer, the rest of the process takes roughly four weeks.

If you fail to provide the proper documentation, the process could take longer. 

While the required documents could vary depending on the company you choose, you’ll generally need the following documents to sell your payments: 

  • Two forms of identification
  • A completed application
  • A copy of your original structured settlement or annuity contract
  • A release agreement

Always keep records of all transactions in a secure, easily accessible location.

Pro Tip

If you’re selling structured settlement payments, you typically need your signed transfer documents notarized. The sooner you return these documents, the sooner you can receive your money.

Source: CYNA Notary 

Step 5: Get Approved and Receive Your Money

The insurance company that issued the annuity contract must approve the sale of a commercial annuity. As long as the sale is legitimate and the buyer is reputable, the insurer will approve your sale, and you will get your money as quickly as the law allows.

Some states require sellers to receive a professional assessment of the sale by a third party, while others allow a narrow window when you can change your mind about the sale. You may want to check with your lawyer or financial advisor about the laws in your state before finalizing the sale.

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Court Approval: The Extra Step for Selling Structured Settlement Payments

Structured settlement sales require an additional step. A judge must review your sale and speak to you to determine whether the sale is in your best interest.

The court approval process can take anywhere between 30 to 180 days, according to the National Association of Settlement Purchasers. 

Once you return signed documents, a local attorney — one you hire or one appointed by the factoring company — files paperwork with the court to schedule a hearing. 

Each state has its own laws and regulations in accordance with the Structured Settlement Protection Acts. These laws exist to protect consumers from unethical factoring companies in the secondary market.

You’ll need to present your case in front of a judge. Be prepared to explain the need for your money and to show that you are not putting yourself or your family in financial jeopardy.

The judge will take your reasoning into account when evaluating the case, as well as factors like the reputation of the purchasing company, the discount rate, your employment status and any previous payment transactions.

If the court approves, the issuing company will receive the transfer order. Your structured settlement purchaser will then send you a lump-sum payment.

Please seek the advice of a qualified professional before making financial decisions.
Last Modified: October 20, 2023