Investors know that the decision to purchase a structured settlement is often a good one. This particular financial strategy offers the benefit of creating an ongoing stream of revenue for an extended period of time, with relatively little risk involved. While it is possible to locate settlements independently and arrange for the purchase without the intervention of financial professionals, the most prudent way to purchase a structured settlement is to work through a settlement broker.
When you purchase a structured settlement, it is quickly apparent that this approach is a viable way of generating ongoing revenue that is made available incrementally over a period of time. Settlements of this type may be associated with the outcome of a judgment in a lawsuit, winning a lottery or the settling of a claim on an insurance policy. The transaction typically involves offering the recipient a substantial percentage of the total settlement in exchange for diverting the scheduled payments to the new owner. The original recipient receives a lump sum payment that is a little less than the total awarded, while the investor gets to enjoy a steady stream of revenue that includes a return that is slightly more than the lump sum paid to the original settlement holder.
One of the main reasons that it makes sense to purchase a structured settlement through a broker is that the nature of the settlement is thoroughly researched in advance. Just as with stock or bond offerings, brokers will take steps to qualify any structured settlement deal before presenting the opportunity to the investor. Since brokers have ready access to markets in which the settlements are traded, they can focus on opportunities that are within your preferred price range, have payment schedules that are likely to meet your needs, and are considered to be very stable, with little to no chance of the settlement being overturned or reduced. In short, working through a broker helps you to avoid some of the risk that would be present if you attempted to manage the purchase on your own.
The return realized after you purchase a structured settlement will depend on the amount of the purchase price. If it is possible to make the purchase for 80% of the total amount of the structured settlement, over time you will earn a 20% return from the deal. Assuming that at least a portion of those settlement payments are invested in some other types of investments, you may be able to eventually generate even more benefit from the settlement purchase.