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Rachel Christian is a writer and researcher focusing on important, complex topics surrounding finance and investments. She is a Certified Educator in Personal Finance with FinCert, a division of the Institute for Financial Literacy, and a member of the Association for Financial Counseling & Planning Education (AFCPE).Read More
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Rubina K. Hossain, CFP®
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- Updated: September 13, 2022
- 7 min read time
- This page features 5 Cited Research Articles
The selling process for annuities and structured settlement payments is simple. But before you begin, take a good, hard look at your situation and decide if you truly need your money immediately.
If the answer is yes, make sure you’re informed, prepared and in control.
There are a few key differences between the process for selling commercial annuities and the process for selling structured settlement payments. To understand these differences, you must first understand that annuities and structured settlements are not the same thing.
Annuities are insurance products that can be purchased from an insurance company or agent. People buy them as part of a long-term retirement plan to guarantee income in their retirement years.
Structured settlements, on the other hand, are periodic payments negotiated between the plaintiff and the defendant in personal injury and wrongful death cases to compensate for the plaintiff’s loss.
They are most often handled by a licensed structured settlement broker using an annuity or other qualified funding asset to finance the payments.
Their legal status makes selling structured settlement annuities slightly more complicated than selling commercial annuities, but for the most part, the process is the same.
If you need to cash out your commercial annuity, you can either surrender your contract or sell your payments to a third-party company.
In contrast, if you need money from your structured settlement, your only option is to 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.
Step 1: Do Your Homework and Research Buyers
A simple internet search is a good way to start researching purchasing companies. Do your homework to find a buyer that can provide you with the best service and the best deal. Look for a company with positive online reviews and a high rating from the Better Business Bureau.
Also, take the time to ask for advice from an accountant or financial planner. Do all that you can to find a reputable buyer that is available to answer your questions.
Step 2: Consult a Representative and Get a Free Quote
After you’ve identified a few trustworthy structured settlement buyers, start making phone calls. Speak with customer service representatives who will explain your selling options in an easy-to-understand manner devoid of confusing jargon. Ask each company for a free quote.Pro TipIt’s OK to tell potential payment buyers that you are getting quotes from multiple companies. You may get a better quote if a company knows you’re looking for the best offer.
Talk to at least two structured settlement purchasers and compare quotes. Verify whatever they tell you with your own research.
You can also call us to find out how much your structured settlement or annuity is worth. We can recommend reputable buyers.
Don’t let anyone pressure you. Take your time, explore your options and make the best decision for you and your family.
Step 3: Consider and Accept an Offer
Evaluate your offer, compare it to others and accept the best one.
If you have a structured settlement, it’s important to understand that you’ll be selling your payment rights at a discounted rate to whichever company you select. The lower the discount rate, the more you, the seller, will benefit because your payments will retain a greater cash value. The higher the discount rate, the more the buyer will benefit.
Discount rates can be negotiated, but most buyers have a rate they typically abide by when they give you a quote. The average discount rate ranges between 9 and 18 percent, according to the National Association of Settlement Purchasers.
If you are 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, which could cost you surrender charges and, possibly, tax penalties, depending on your age and the length of time you’ve had the annuity.NEED HELP?Get $1,000 cash advance when you contact us for a quote.
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 are selling future structured settlement payments, you will need to provide information and complete various forms. You will also need to send a copy of your original structured settlement contract to the factoring company.
If you lost your original contract, contact the insurance company who issues your checks and request a copy of your policy. Alternatively, you can reach out to the lawyer who negotiated your settlement.Documents You’ll Need to Sell Your Structured Settlement:
- Two forms of identification
- Completed application
- Copy of the original structured settlement contract
- Release agreement
Once you accept your cash offer, the factoring company will send you the transfer documents to sign and have notarized. The sooner you return these documents, the sooner you can receive your money.
Always keep records of all transactions in a safe, easily accessible location.
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.
It takes between 45 and 90 days on average to sell structured settlement payments. Some states require sellers to receive a professional assessment of the sale by a third party, while others allow for a “cooling period” during which you can change your mind about the sale. You may want to check with your lawyer or financial advisor about the unique laws in your state before finalizing the sale.
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.
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. Waiting for a court date could take up to 60 days after filing all signed documents, but it depends on where you live and what is already on the court docket in your area.Did You Know?No court date is required if you are selling payments from an annuity purchased through an insurance company.
Your court appearance is the most significant variable in how long it takes for you to receive money from selling structured settlement payments. If you need funds faster, you may qualify to receive a cash advance from the factoring company within a few days.
Each state has its own laws and regulations in accordance with the Structured Settlement Protection Acts. These laws exist to protect consumers from unscrupulous factoring companies in the highly competitive secondary market.
Regulations vary from state to state but may require you consult an attorney or seek outside professional counsel before finalizing an agreement.
When you receive a hearing date to approve your sale, you’ll find yourself standing 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 other factors such as 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 for acknowledgement. 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: September 13, 2022
5 Cited Research Articles
Annuity.org writers adhere to strict sourcing guidelines and use only credible sources of information, including authoritative financial publications, academic organizations, peer-reviewed journals, highly regarded nonprofit organizations, government reports, court records and interviews with qualified experts. You can read more about our commitment to accuracy, fairness and transparency in our editorial guidelines.
- Agrawal, A. (2016, August 12). The Difference Between an Annuity and Structured Settlement. Retrieved from https://www.huffpost.com/entry/the-difference-between-an_b_11482226
- Maurer, T. (2013, December 9). Everything you need to know about getting out of an annuity. Retrieved from https://www.cnbc.com/2013/12/09/everything-you-need-to-know-about-getting-out-of-an-annuity.html
- Mercado, D. (2010, March 10). Secondary market for annuities comes under pressure. Retrieved from https://www.investmentnews.com/secondary-market-for-annuities-comes-under-pressure-27322
- National Association of Settlement Purchasers. (n.d.). Secondary Market FAQ. Retrieved from https://www.nasp-usa.com/secondary_market_faq.php
- Texas Department of Insurance. (2022, May 2). Annuities guide. Retrieved from https://www.tdi.texas.gov/pubs/consumer/cb078.html
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