How Much Do Structured Settlement Brokers Charge
An important consideration when selling your structured settlement is knowing not just the value of your structured settlement, which you can check with our settlement calculator, but also what settlement brokers charge.
If you're interested to sell a settlement for a lump sum, you will naturally receive a quote for an amount that is less than if you were to receive the scheduled payments. The reason behind this is known as the discount rate.
A structured settlement buyer can provide a lump sum, and their broker fees are related to what the time value of the money is in doing so. When they give you cash today, its locked into the settlement they've purchased and no longer available for investment elsewhere. Should the buyer have taken a loan to purchase your structured settlement, they are responsible for the interest on that loan. Since the buyer needs to wait for the scheduled payments of the insurance settlement to recoup their investment, his cash is no longer 'liquid' (accessible) for other opportunities.
So, having said that, the discount rate is regarded as the buyer's valuation of such costs, and a form of compensation for lost investment opportunities to provide your cash now. This can involve assorted expenses from legal costs to office, employees, and other possible operating costs.
Since there is no standard discount rate to be expected from a structured settlement buyer as a typical fee charged due to many different circumstances revolving around the evaluation of an insurance settlement and its worth, the factoring transaction still needs to be approved by the court. Should the judge feel that the discount rate is too high or the structured settlement sale is not considered in your best interest, its possible that your request to sell would be refused. This isn't that common as its in everyone's best interest to put forth the best acceptable offer.
This is partially because costs for going to court for negotiating when selling a structured settlement, factoring transaction, and other related considerations can amount to thousands. Note that these costs are not the responsibility of the annuitant or settlement holder, but the structured settlement company.