Selling Your Annuity
An annuity is a financial agreement struck between an individual or company. These are often agreed to be the most ideal way to receive payments (reciprocation) over the course of a person's lifetime. Structured settlements differ from this definition, in that structured settlements are issued as a result of a court award, such as in a personal injury case.
The benefits of an annuity may be started immediately, or can be postponed until retirement, etc. The important thing to consider, is why these long-term payments are made in your own best interest, there are other events that may influence you to decide to sell these payments early, in order to collect either a portion, or a lump-sum of your remaining annuity payments. The most common reasons include debt, investment, medical emergency, schooling, or large purchase.
The most important thing to consider before selling any annuity, is how to maximize your payout.
There are various types of annuities, such as structured settlements, single premium annuities, pensions, lotteries, and other forms of compensation payouts. Before you decide to cash out an annuity, it's important to be aware of its approximate present value. When looking to sell your annuity, you'll undoubtedly notice you would be receiving quotes for less than the overall amount contributed. When selling an annuity, you will not receive face value. The reason being, the valuation is based on the amount of payments left, length of the term, rating of the insurance company, amount you receive for each payment, interest rates, the time value of money principal, and secondary market considerations such as demand.
When selling an annuity there is a discount rate involved and it can vary on the factors outlined and more. To understand what yours might be worth, try our annuity calculator for an approximate present value.