If you have saved enough money, you now want to do something with it. Keeping the money saved does not make anyone happy when they look into the inflation rates and how that money loses value over time. The best option for you to make use of your money is to invest it. When it comes to investment, you have plenty of options to choose from. One of the options that have become quite popular these days is of structured settlement investments. This is quite a unique type of investment and a lot of people do not know how it works. Let’s take a look at what these investments are and how people benefit from them.
Structured Settlement Investments – The Basics
Before invest your money in this type of investment, you have to know what it is and how it works. Such settlements usually arise from personal injury cases. In a personal injury case, there is a plaintiff that claims that the at-fault party has caused some damage to the plaintiff. The plaintiff, with his/her lawyer, has to prove the negligence or fault of the at-fault party. If the fault is proven successfully, the defendants reach a settlement with the victims. They agree to pay an amount to the victims to cover their losses and damages. Now, this amount can be awarded to the victims in one of two ways.
The defendant can either credit this amount to the victims as lump sum or an agreement can be reached in which the amount is given to the plaintiff in the form regular payments for a set duration of time. This is called structured settlement. Now, it is the company of the defending party that has to credit the payments into the plaintiff’s account for the set duration. This insurance company can somehow change the course. It can go for reinsurance and ask another insurance company to take care of paying the plaintiff as per the terms and conditions of the structured settlement.
Structured settlement investments arise when the plaintiff, who is receiving the payments, decides that he/she wants to receive the entire remaining amount as lump sum. The insurance company does not change the deal in this particular case. However, it arranges an investor who is willing to pay the remaining balance on the settlement of the plaintiff as lump sum. This lump sum is then paid to the plaintiff whereas the structured settlement now transfers in the name of the investor. If you are considering structured settlement investments, you have to know how this all works.
Why Structured Settlement Investments Make Sense to Investors
There are many reasons why investors choose structured settlement investments. Here are some of the benefits that they are looking at.
They Don’t Pay Taxes
One of the best things about the payments received in the structured settlement investments is that they are tax-exempt. There are not many types of incomes in the market that you can get your hands on without paying taxes. In this particular, you are not paying any taxes and this is why the money is increasing in value with the passage of time.
Their Portfolio Gains Weight
If you are considering structured settlement investments, you will be glad to know this particular point. The companies that turn these settlements into investments are some of the most renowned insurance companies of the country. It is quite an achievement when such a big name appears on your portfolio. Having their insurance policy in the hands of the best also ensures that their payments will not be taken away or messed with.
They Feel Secure with Their Money
If you have read about how structured settlement investments work, you must know at this point that they stem from cases in the courts. When you look at the payment schedule of the settlement, you can rest assured that this has been approved legally by the court. In short, you can be sure that you will receive the money no matter what happens. Even if the insurance company disappears from the middle for some reason, you will still receive your payments. Such security only comes with structured settlement investments.
Should You Consider Structured Settlement Investments
What you consider suitable for yourself depends on you. Just like many other types of investments, structured settlement investments have their pros and cons too. One of the issues that you will face with structured settlement investments is that they are not liquid. It is more like you are stuck with the plan that you picked at the time of investing. Yes, you do have the option of selling the plan to another buyer in the market. However, you will have to incur some loss when you go on this route. You have to know that when you sell your plan in the market, no one is going to pay you the full value of it.
You will have to discount the price of your settlement and so you will lose some money. These are the big issues that you will have to deal with when you go for structured settlement investments. Think about it, what else can you do with what you have in this scenario? No matter how high the returns are on this type of investment, they are still fixed. With stocks or other types of trades, you can expect huge gains based on the conditions in the markets. Furthermore, you can use features like leverages to increase your profits. With structured settlement investments, you don’t have any of these options available.
It is extremely important that you weigh the pros and cons of structured settlement investments before you invest your money in them. It is also highly recommended that you hire the assistance of a financial advisor before you go on this path. If there are things that seem too good to be true to you then you should stay away from them. Let the experts do the analyses and assessments to tell you whether you are going for the right type of investment or not.