The Pros and Cons of Investing in Structured Settlements

In an investment climate that is sometimes stagnant and often risky, investors of all backgrounds are looking for the right places to put their money. Unfortunately, there is no universally ideal investment for all, but structured settlements are becoming increasingly popular. Structured settlement owners often want to sell their settlement plans for lump sums, and this is where investors can come in to make a profit.

Pro: Low Risk
One of the greatest benefits of structured settlement investments is that they have a good track record. Lots of investments are advertised as low risk, but few hold up to their claims. Of course, there’s no such thing as an investment with no risk, but structured settlements are generally less risky than many other investment opportunities.

Con: Reduced Liquidity
What has a front must surely have a back. The flip side of the low risk entailed by structured settlements is that they are also low liquidity. Once you put your money into a structured settlement investment, it becomes quite difficult to get out of it. You’d need to find another investor to take on the settlement plan, and transferring becomes increasingly complicated.

Pro: High Returns
In general, a structured settlement investment will yield relatively high returns for the investor. In times when the markets seem stagnant, this can be very beneficial to the portfolio. A structured settlement may yield significantly higher interest rates than other investments. If your portfolio is on a down-turn, a structured settlement may be a good buoying investment.

Con: Reliability Concerns
As you must know by now, there is some risk involved in every investment. Without risks, there can’t be returns. There is always the possibility that the insurance company paying out your structured settlement could default, as we’ve seen in the past. There is no absolute guarantee that you’ll receive your entire payout. Unlikely as it may be, an unexpected bankruptcy or liquidation could send your dollars scattering across the market floor.

Pro: Positive Cash Flow
As long as you hold your structured settlement investments, you can expect a positive cash flow on a regular basis. Barring any unexpected complications, your settlement will pay off regularly, and everything should go according to plan. This steady source of income is a boon to many investors, especially those who have large amounts invested in higher risk markets. Steady cash flow is always a good thing, and you can expect it from a structured settlement investment.

Con: Long Maturity Timelines
When you invest in a structured settlement you’re spending thousands of dollars in an instant, and while your returns will usually make the investment worth the price, it will take a long time. Your structured settlement may take 20 years or more to pay out fully, and this is a timeline that not all investors find ideal-a worthy consideration for any parties considering this kind of investment.

Before you decide to pay a lump sum for a structured settlement, carefully consider the pros and cons of your investment choice. There is no such thing as a perfect investment. There will always be risks and inconveniences, but if the benefits outweigh the down sides, structured settlement investing may be a good choice for you.

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