Cash For Structured Settlements: To Invest or Not to Invest

It seems like everywhere you go these days, people can’t stop talking about the newest investment strategy they’re using. Even in the worst economic climate in decades, it still seems to be all about “real estate this”,”bond market that” and “stock performance other thing”. No matter what their situation, people from all tax brackets are always looking for the latest and greatest way to invest their money – and do it apart from what others are doing. Purchasing a structured settlement has become one of those ways.

For those not in the know, a structured settlement is where a person is awarded some money that will be paid to them over a set period of time. This usually will result from an injury or life insurance settlement, especially in the case of workers compensation claims that go to court. The plaintiff in the settlement now has a set income for the specified number of years. Depending on their situation however, the payments over time may not work for them. Structured settlement recipients often don’t want to receive their payout over the set period of time, they want their money and they want it ASAP. Whether correct or not, they think they can make better use of the money in the short term than they ever could over time. They may have high hospital bills or perhaps they’ve suffered a catastrophe that requires more funds than the monthly payouts would provide.

This is where a potential investor might see an opportunity. As such an investor, it is possible (depending on where you live) for you to buy someone’s structured settlement payments for a lump sum of cash. Sounds a little strange, right? Hear me out. My cousin (god forbid) gets in a horrible accident at his construction site and wins a $500,000 settlement from his company’s insurance. The terms of the settlement state that the company will pay the $500,000 over the next 10 years which comes out to $50,000 each year. As it turns out, his multiple surgeries are not covered by his insurance and he needs $75,000 right now to cover his bills and other expenses while he’s unable to work so he would prefer to get, say, $150,000 now and let another party get the rest of the payments over the next 10 years. You, as the investor, could be that other party. You would have to lay out $150,000 in cash for the structured settlement payments initially, but over the next 10 years you would get a 333 percent return on the “investment” of $150,000. It’s actually relatively simple if you have the cash to fund the initial purchase.

While it may be simple, unfortunately it isn’t quite so easy. The process to pay someone cash for their structured settlement involves attorneys, judges, and multiple insurance companies – all things people usually hate. If you’re uncomfortable doing this on your own, go ahead and consult a company who deals with these sorts of transactions and they can walk you through the procedures. Good luck!