Structured settlements have been around in countries like the United States and Canada since the 1970s. Since then, the process whereby claimants are awarded sums of money based on the nature of the injury done to them has undergone several changes.
First, the settlements for these injuries were paid in lump sums but it was decided the process would be more equitable to both the claimant and the party responsible if the settlement was paid in installments, hence the term structured settlement.
As the process of structured settlements grew and evolved over time, individuals receiving these monies decided for a variety of reasons that it would be best for them to sell off the rights to these settlement payments. Hence the phrase structured settlement factoring transaction. Usually, a structured settlement would use an insurance company like Allstate to come up with the money for the arrangement and the factored part of the transaction is handled by a variety of companies who use discount rates as pricing models.
Historically, the idea of structured settlements factoring transactions came up as people decided they would rather have a lump sum than installment payments, and the system used is similar to the one used in business’ which need to maintain or increase their cash flows. Here’s how it all works.
Say a claimant has a check coming to them for $50000 dollars. The person decides they need the money right away, so rather than wait, they go to a structure settlement factoring company that gives them $35000 up front. So with a structured settlement factoring transaction using a company that deals in this type of transaction, the claimant gives up the right to a monthly installment in favor of getting a lump sum minus 15% to 20%.
Critics point out that the claimant is losing a percentage of the money owed to them but historically these transactions were seen as necessary for many people who needed money immediately and could not work at all.
There is a process for factoring a structure settlement and the first step involves the structured settlement holder getting quotes from various companies that factor these settlements. When the owner of the policy finds a company they’d like to do business with, that company begins the underwriting process.
The underwriting process includes getting permission from the insurance company and obtaining the necessary legal contacts which usually involves getting an attorney in the state where the settlement was obtained in. Most experts agree the entire process takes six to eight weeks to receive funding. These companies are not hard to find and a blossoming market has evolved around those claimants who would rather get the money right away rather than have it come to them in installments. One of the things that makes structured settlement factored transactions so appealing is the fact that the forms only need to be filled out once and there is no need to repeat the process monthly.
Source: http://www.ArticlePros.com/author.php?James Grace
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