If you have requested that your policy pays off as an annuity to protect your family over a specific period of time, can they disregard your wishes and get a lump settlement? Here's an article by a professional diversified cashflow specialist revealing what is happening in the world of annuities today.
(C) Copyright 1999 by Virginia Dunn
Virginia Dunn is a diversified cashflow specialist. (She can assist people in selling their future payments for cash they can use now.) This personal finance issue of turning tomorrow's dollars into cash today has really become a hot topic. This article is presented as a service to our visitors. It is not an endorsement of the information or the practice.
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You've seen the ads- - -
"Are You Receiving Payments |
A distinguished gray-haired gentleman is touting the benefits of selling your structured settlement payments. Loud, high profile commercials are encouraging you to get cash now for your future annuity payments.
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Much controversy has arisen about this relatively new practice of cashing in one's structured settlements or annuity payments, a practice which is just one facet of a much larger industry becoming known as "Diversified Cash Flow". Structured settlements, and the annuities that go along with them, are an interesting animal and the entire picture is highly complex and difficult to understand. The annuities themselves represent a very large income stream for insurance companies. Additionally, the fact that the settlement awards are structured provides a means for the insurance industry to secure huge tax breaks from the government. Here is their pitch: By structuring the payments of an injury award over time, the insurance company is providing long-term support for the injured party, thereby keeping them off of welfare. By keeping these people off of the roles of government subsidy, insurance companies are providing a valuable public service - hence, they should qualify for tax breaks. |
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Our government agrees.
Obviously, there are a lot of holes in this philosophy.
The first one that comes to mind is this -
Structured settlements include annuity payments to the injured party which are tax free. They are NOT reported to the government as income.
Since there is no record of these payments,
what is to stop the recipient from going on welfare anyway?
Another thing to think about is that many people who receive these payments do in fact work full time and were never candidates for welfare in the first place.
Some received these payments as compensation for the wrongful death of a spouse or a child, some may have sued an employer or an irresponsible professional, company or industry.
There are many ways that a settlement can come about and only a fraction of those settlements are for injuries that could force people onto welfare.
Of course, the insurance companies make a lot of money on these deals, not only in the tax breaks they receive, but also from the interest they earn on the annuities that are purchased for the structured settlement payments to be made.
(Note that the annuity does not belong to the injured party. It belongs to the insurance company. Any income earned from the annuity that is above and beyond the required payments belongs to the owner of the policy, and who is that?)
And, it goes without saying that the injured parties, as well as their attorneys, would be quite surprised to learn just how little was actually paid in order to meet those future structured settlement payments.
How profitable are these settlements and annuity agreements for the insurance industry? It's hard to say and the insurance companies want to keep it that way. Their industry is spending tons of money and flexing their political muscles to stop the practice of selling annuity and structured settlement payments altogether.
To this end, they have been lobbying heavily at the state level to enact legislation to make the selling of structured settlements and annuity payments illegal. Already in the states of Illinois, Connecticut, Kentucky, Virginia & West Virginia, their lobbyists have successfully placed roadblocks which have made it difficult or impossible for people to sell their payments. They call this protecting the clients interests.
(Note that although this practice is presently illegal in Texas, an alternative "loan" program has been introduced, with that state's blessing.)
Will this bring an end to the selling of structured settlement and annuity payments?
Not a chance. In fact, the evidence indicates that just the opposite is true. Structured Settlement Purchasers are fighting the huge insurance lobby on a variety of fronts - and clearly holding their own. Instead of slowing the traffic of sellers, the number of people who are converting their structured settlements and annuitys payments to cash is growing by leaps and bounds.
Why?
Because people need access to their money.
Insurance companies have demonstrated over and over again that they are totally inflexible in regards to the payments of structured settlements. It does not matter how drastically your circumstances have changed. Once you've settled, you're done.
There is no way to gain access to any of your money in advance of the payment due date, no matter what the crisis or how desperate the circumstances.
It is this total lack of flexibility in helping recipients in a time of need that prompted the creation of the structured settlement purchasing industry. It was an answer to a clear need and a desire to help that has now formed into a win / win situation for many, recipients and investors alike.
Annuity and structured settlement purchasers, or "funders" as they are known, have launched a campaign aimed at bringing this industry into the mainstream.
The Diversified Cash Flow Institute, together with the Open University, has brought forward their vision of educating people about this industry and the options that are now available, for both structured settlement payment recipients and professionals who desire to work in this arena. Other members of the structured settlement purchasing community are using television, radio, newspapers and the world wide web to get their message out.
What is that message? Simply that if you are locked into payments from a structured settlement or annuity case, and waiting for those payments is not serving you - you now have a choice.
You should know your options. Structured settlement purchasers urge recipients to examine their individual situations and then make an informed decision about what is best for you, for your family, for your life.
After All, It Is Your Money!
Virginia M. Dunn, is an independent broker, certified diversified cash flow specialist, and owner of Integrity Funding Sources. For more information on this subject, or to learn how to get top dollar when selling your structured settlement or annuity payments, please visit their website @ http://www.IntegrityFunding.net You can also call them toll-free @ 1-888-5FUNDME
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