Whats a structured settlement

The basics

A structured settlement is a financial or insurance agreement that a person accepts in the case of injury, rather than taking a one-time monetary payment. Settlements usually arise from some legal claim, and provide a person with a specific amount of money for a fixed period of time. Although structured settlements can provide comfort for a period of time, this method of payment may create problems for people who require liquidity in order to take care of current financial obligations, like in the case of emergency situations when the structured payments aren't enough to cover expenses.

Due to the number of structured settlements that are active each year, a market for these has developed and allows owners of these settlements to trade them if their financial situation requires it. These options, although possibly a good thing for people experiencing short term financial issues, should be considered as a last resort. An example of the use of this market would be to sell your life insurance policy to avoid high premiums.

Types of Structured Settlements

A structured settlement is usually a method of compensation paid to a person who has been awarded a large amount of money from a civil suit or an insurance claim. There are two common ways to fund the obligation which a party responsible for paying the claim will generally use. First, the buy-and-hold method. The party purchases an annuity from a life insurance company. Second, the assigned method. The settlement obligation is assigned to a third party, which in turn purchases an annuity like in the first method. 

Take my money,

Phil