What is An Annuity?
- There are many kinds of annuities for different situations
- Annuities are sometimes used for the payment of structured settlements
- Annuities are meant to provide income over time, rather than all at once
An annuity is a contract where an insurance company or another group agrees to make payments to an individual for a specific period of time. Many times, the person receiving the payments is the plaintiff-or the injured party-in a lawsuit. The choice to settle a case using an annuity saves the defendant much more money than a cash settlement, because of a concept called time value of money.
Annuities are designed to provide income over a long period of time-generally several years. There are multiple kinds of annuities; many lottery winners receive an annuity for their jackpot winnings, for example. Just because the annuity guarantees payment over a period of time does not mean it is always a good choice for the plaintiff in a lawsuit however; there are many circumstances that lead to the need for the person receiving an annuity to collect all or some of the money all at once, rather than waiting for payments over several years.
Why Do People Sell Annuity Payments?
- Many people who are involved in lawsuits have bills to pay
- Some people receiving an annuity want to invest in their education, or buy a house or car
- Selling an annuity can be a good decision if you need a large sum of money for a major expense
If you have been injured because of someone’s negligence, and have received a settlement in the form of an annuity, then you may also have a lot of expensive needs that go along with your injuries. Since lawsuits and settlements can take months or years to be concluded, those bills may pile up. If you have these kinds of expenses, then selling an annuity for a lump sum of cash may be a good option for you; you can take care of bills and get your life back to normal.
Some other reasons you might want to sell your future annuity payments for cash you can use right now include wanting to pay for your education-or for education for your children or loved ones. You may want to buy a house with your annuity money. Other major expenses include cars and starting a new business. In all of these cases, it probably makes sense to try and sell annuity payments in exchange for a lump sum of cash.
What Kind of Annuities Qualify?
- Although not all annuities qualify, many do
- Structured settlement annuities are the primary type
- We can help you find out if you can sell your annuity payments
We explained before that there are many different kinds of annuities; there are pension annuities, lottery jackpot annuities, deferred annuities, and even more. The primary annuity type that DRB Capital is able to help you with is an annuity that comes from a lawsuit. If you have received a settlement that includes an annuity payment, we can help you to discover whether or not you qualify to sell your future annuity payments to get some or all of your cash at once.
Knowing whether or not your annuity will qualify can depend on a lot of factors. The best way to know for sure is to contact us. One of our representatives will find out the details of your annuity payment and let you know if your annuity qualifies, and give you an idea of how to sell annuities and what the process means. With DRB Capital, you will work with the same representative throughout the process, so you can be confident you know what is going on.
What is Time Value of Money?
- The value of the money you receive in an annuity changes over time
- The amount of money you receive in your annuity may be worth less in the future, even though the amount itself hasn’t changed
Time Value of Money is an important concept in annuities and structured settlements. Basically, the idea is that over time the value of money tends to decrease. You can see it for yourself in your everyday life: something that used to cost $5 a few years ago may cost $7 now.
One example of this is that in 1983, daycare cost about $40 per week; in 2011, however, it costs an average of $143 per child per week. Another example is that in 1985 the average rent for an apartment was $315 per month-while in 2013 that cost has gone up to $1,062.
With that in mind, consider how long it will take your annuity to finish paying you; how much will the money be worth by the time you reach, say, the year 2033? If you need money now for a major expense, or are interested in investing in education or a new business, it may be a good idea to sell an annuity for money right now, instead of waiting.