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Fact or Fiction: People say the funniest things about selling structured settlement annuities

As you may be aware there are many companies as well as brokers involved in the structured settlement factoring industry. There are also quite of few hired guns posting and tweeting about how and why you should sell your future payments to whomever they are representing. One of my biggest complaints is that on many occasions I have come across posts that are blatantly wrong, misleading or confusing to even industry professionals. Is it SEO, lack of industry knowledge, language barriers or creative marketing that causes bloggers and copywriters to post statements that are somewhat questionable?

I decided that it might be fun to grab a few of my favorites and play a game called Structured Settlement True or False.

How to play: Simply decide whether the statement is true or false.

1. You have more security when you sell your future payments to a real FDIC insured bank.
• FALSE: When you sell your annuity payments, which aren't FDIC insured, you're selling the rights to the annuity payments in exchange for a cash lump sum. FDIC doesn't have anything to do with annuities or the transaction unless, of course, you decide to deposit the money into a bank that becomes closed by a federal or state banking regulatory agency.
2. Other companies are brokers who wedge themselves between structured settlement annuitants and the financial institutions that actually purchase the payments.
• FALSE: Yes, there are some people in the industry who are brokers but it is not the general rule. Companies like Rescue Capital actually purchase your payments.
3. Because they need to make a profit, structured settlement factoring companies will not be willing to give you as much of a payment as a bank will.
• FALSE: Banks need to make a profit too otherwise they would go out of business. Every company that purchases future payments has some sort of overhead and need to charge accordingly. Publicly traded banks have to worry about their shareholders and the perceived value of their stock. That value comes with their ability to make a profit. Smaller, agile privately owned companies can charge significantly less because they have lower overhead.
4. Banks have reputations to protect and need to keep their customers happy, you can feel confident that they will not try to fool you or unfairly take your money.
• FALSE: Is this author unaware of all the recent banking scandals? Remember folks, when you sell payments they need to be approved by the courts. Most companies would like their customers to be happy, have repeat business and referrals. No company can survive in the long-term if they were stealing from their customers.
5. Working with a bank can not only help you receive the money that you want but can also give you peace of mind that you are working with and established company.
• FALSE: I guess there are no new banks and banks never fail. There are many companies that are established in the structured settlement factoring business. Being an established bank is irrelevant since these individuals don't necessarily know the ins and outs of the industry. Some industry professionals have more than 18 years experience in the structured settlement factoring industry and are considered to be subject matter experts. When you sell your payments you should more concerned with industry experience, pricing and company reputation.
6. A good number of companies that will buy your structured settlement quickly sell the payments to a bank.
• FALSE: When factoring companies purchase your payments, they resell those payments to individual investors or through a process called securitization which combines all the annuity payments into one large pool, the issuer can divide the large pool into smaller pieces and then sell those smaller pieces to investors. The process creates liquidity by enabling smaller investors to purchase shares in a larger asset pool. Individual retail investors are able to purchase portions of the annuities as a type of bond.
7. Structured settlements are a popular way to resolve personal injury claims, lottery payments, insurance claims and other situations where one party must pay another.
• FALSE: A structured settlement is a financial arrangement. An annuity is a financial product that provides a series of payments over a specific period of time such as a lifetime. Delivered on a set schedule, these payments can be paid monthly, quarterly, biannually, or annually. There are many different types of annuities but they are typically sold by insurance companies. Many individuals purchase them in order to have a reoccurring source of income during retirement. As in the case of a structured settlement, the insurer, or designated third party, purchases an annuity from a life insurance company in order to provide periodic payments to the claimant. When you win the lottery you have the option of receiving a cash lump sum or an annuity. This is not a structured settlement.
8. Structured settlements are a way of settling a debt that became popular in the United States in the 1970s.
• FALSE: Before 1970, when a lawsuit was settled the injured party would immediately receive a cash lump sum. Then there was a major liability case in Canada and Europe that resulted in a great percentage of catastrophically injured people. Suddenly there was a need for settlements to last throughout the injured party's lifetime. Hence, the modern structured settlement was born. In order to protect the annuitant, Congress enacted legislation that made compensation paid as a result of a personal injury tax free to recipient. Congress later enacted additional legislation which gave insurance companies tax benefits for setting up structured settlements.
9. Personal injury claims, lottery payments, insurance claims and other financial arrangements are increasingly being paid with structured settlements.
• FALSE: These payments are paid by an annuity which is a financial product that provides a series of payments over a specific period of time such as a lifetime. A structured settlement is a financial arrangement that allows court-awarded compensation to be paid in regular installments rather than in one lump sum.
10. They have become popular because the payments are made over time, benefitting both parties, but sometimes the person receiving payments would rather have a lump sum payment.
• FALSE: The need for income to last throughout the injured party's lifetime is the reason they are popular. Plus there are tax benefits to having a structured settlement.