What can the author of Side Effect of Penicillin on Cats and the Signs and Symptoms of EColi Food Poisoning offer you on the subject of structured settlements? Apparently not much.
According to his bio Matt Olberding has been a professional journalist for nearly 15 years at newspapers in Nebraska, Minnesota and Florida. He is currently a full-time business reporter and editor at a mid-sized daily newspaper and also has his own business-related blog. He is both a copy editor and writer for Demand Studios.
- Olberding: While the regular, orderly payments of a structured settlement are nice, if you find yourself in a bind and needing money for a large purchase, your settlement terms may not allow you to borrow against the future payments. If you absolutely must come up with a large sum of money, there are companies that buy structured settlements, but you will lose money on the deal.
Loss of Investment Return
- Olberding: By taking a structured settlement, you lose the potential investment returns from investing a large lump sum payment. Depending on market performance, you could wind up with a lot more money in the long run from a lump sum payment. And most structured settlements do not index their payments for inflation, meaning your payout will have less purchasing power years down the road.
- Olberding: Structured settlements are set up like annuities, and there are both upfront and ongoing costs. Expertlaw.com says it's important to compare fees charged by insurance companies that do structured settlements.
- Olberding: Like annuities, structured settlements are often set up so that payments cease upon the payee's death. In this case, if you were to die unexpectedly, your family would not get the full benefit of your legal settlement. Expertlaw.com recommends that you set up your structured settlement to make a minimum number of payments or pay the balance to your estate upon your death.
Comments: It is a common misconception, fostered by journalists like Matt Olberding, that structured settlements are created through a unilateral process.
Settlements are the result of a compromise, or "meeting of the minds". A structured settlement can be customized to suit an individual claimant's needs. Few structured settlements are set up as pure life only deals, although in some circumstances, if placed in combination with a life insurance policy it may make sense.
An annuity with a life contingent component is a superior form of longevity risk management. Think about a certain amount of cash that has to get you through the rest of your life. Do you know how much money can you spend each month without having the money run out too quickly? The volatility of the stock markets, real estate markets, the impossibility of knowing exactly when you are going to croak, together with vary spending levels and timing of spending make it an uneasy task. Some settlement planners are capable of running a Monte Carlo Analysis for you which can help to better frame your longevity risk.
Ineligibility for Public Benefits
- Olberding: Structuredsettlement-guide.com says that unless your settlement is set up correctly, the payments could disqualify you from receiving public benefits such as Medicare or Medicaid.
Possibility of Default
- Olberding: There is a chance that the company or person against whom you won the judgment will at some point become unable to pay. Structuring the settlement like an annuity and using an insurance company is supposed to guard against this, but it is also possible-- though the chance is very remote--that the insurance company administering the payments could go out of business or declare bankruptcy. For this reason, Expertlaw.com says it's a good reason to consider using multiple insurance companies for your structured settlement.
Check your facts Matt, insurance companies cannot declare bankruptcy.
An insurance company does not simply administer payments. When a premium is paid to an insurance company in exchange for a contract and the contract is approved and placed, the risk for which the policy has been purchased as protection, has been transferred to the insurer (at least to the limit of the policy, or duration of the annuity).
Diversification IS a good strategy.
Yet again we have someone with no bona fides on the subject of structured settlements who has used an online posting service such as EZine Articles or Ehow to promote a poorly researched document.
in addition to being one of Archie Bunker's (left) favorite "terms of affection", a dingbat is also an ornament which is the value this author places on Olberding's work in the area of structured settlements.