Hedged vs. Unhedged Life Contingent Structured Settlement Sales
In recent years the sale, assignment and transfer of structured settlement payment rights has gained a great deal of popularity. States across the country have enacted laws that permit an individual that obtained the right to receive some sort of deferred income as part of the settlement of a personal injury lawsuit, the ability to liquidate the structured settlement in order to procure a lump sum payment. As you may know structured settlements, like annuities in general, come in all different shapes and “sizes”. .
Generally, speaking the size and nature of a structured settlement is driven in large part by the degree or severity of the underlying claim. That is to say, a person that suffers from a dog bit that has no lasting injury will like receiving a smaller structured settlement than someone with a more severe traumatic injury. Many times a structured settlement is largest when it occurs as part of a resolution of a wrongful death claim and/or permanent life altering injury (e.g, loss of a limb, severe burns, etc). Lets assume for a second that the structured settlement is elected after a substantial injury.
A substantial injury often results in monthly annuity payments. These monthly annuity payments will be guaranteed for a fixed period of time- 20, 30, 40 years and then may contain a life contingent tail. The life contingent tail means that the original annuitant will continue to receive the monthly payment for as long as he or she is alive. So, for example, if the injured plaintiff accepts the annuity for 20 years guaranteed and then for as long as he or she is alive, the person has agreed to accept “life contingent structured settlement payments”.
Over time, a market has arisen whereby a person that wants to sell life contingent structured settlement payments can speak to one of several very qualified structured settlement buyers and work with those buyers to get a lump sum. The amount of the lump sum that a person receives will be based on a host of factors including the time and size of the monthly life contingent payments. In addition to these factors, the amount will be determined (in some situations) on whether it is possible to hedge the risk that the payments will not be made as a result of death through the issuance of a separate independent insurance policy. Normal underwriting requirements will generally be applied to determine if a person qualifies for life insurance. Of course, procuring a life insurance policy is not a requisite to the sale of life contingent structured settlement payments.
You can contact the life contingent structured settlement buying experts at 800-317-3769.