When you are involved in an accident or other incident that results in a settlement agreement between you and an insurance company, you may be granted a structured insurance settlement where the insurance company agrees to pay your award in installment payments, plus interest. For many people, structured insurance settlements serve as a source of a modest side income for the long-term, and they are a guaranteed payment. However, many people decide to sell their structured insurance settlements for a lump sum payment, or sell off a part of their settlement so that they can get some cash, fast. It's important to understand how structured insurance settlements work and be prepared to receive less than the original award amount when you do proceed with the sale.

How Structured Insurance Settlements Work

When you are involved in a court case with an insurance company and reach a settlement agreement, you may have the option to receive your award as a lump sum payment upfront, or as an installment plan. Choosing the installment plan offers several benefits. One of the key reasons to accept a structured insurance settlement instead of a lump sum award is because your installment payments will not be subject to taxes. You can also count on a steady stream of cash for the entire course of the agreement, which may help you manage your budget and cash flow better in the long-term.

Structured insurance settlements are usually agreed upon outside of the court, so you won't have to worry about court costs and other fees. However, some people decide that they would prefer to receive their settlement as a lump sum payment at a later date and may have the option to sell their settlement to a third party for a fair price.

Selling a Structured Insurance Settlement Policy

The first thing you need to do when you are interested in selling a structured insurance settlement policy is to find out what laws and regulations govern the sale of structured settlements in your state. Federal and state laws will dictate how much you are able to receive from the sale, and whether the sale is even legal in your state. If you are able to sell your structured insurance settlement policy, you will need to find a buyer that offers the most attractive terms and rates. Every buyer will require you to pay a fee for the transaction, and this fee will come out of the final sale price.

When you decide to sell structured insurance settlements, you need to remember that you will only be receiving a fraction of the total award amount as a lump sum payment, or the buyer may offer to buy a fraction of your payments. The buyer will not typically pay anything close to the amount you would have received over the course of the structured insurance settlement agreement plus interest, so you are forfeiting your right to earn interest on the amount and get the full amount that was negotiated with the insurance company. Still, for many people, this approach is a better choice because they need the money upfront for various reasons. Many people choose to sell their structured insurance settlement policy if they are dealing with unforeseen expenses, need to pay for medical expenses, or if they have decided to pay down their mortgage quickly.

Whatever the case may be, you will need to present your reasons to a judge before the sale of your structured insurance settlement can be approved.