The AIG bailout was the kind of financial earthquake that sent reverberations that were felt throughout the business world, but perhaps few places as strongly as the structured settlement markets. AIG is a huge operator and many people were left – understandably- worried about the safety of their annuities. The government has stepped in for now, and it appears that things have stabilized. Insurance policies are tightly regulated and should have assets to pay claims. However, many people are understandably worried.
Unpredictable Times
According to the FDIC, 98 banks have failed so far in 2009. That is compared with 26 banks in 2008. There is no single source of clear information about insurance companies. On Capitol Hill, the House Financial Services Committee has proposed to create an Office of National Insurance. Such an office would be aimed at expanding access to information about the insurance sector. In the meantime, consumers who are concerned about the health of the company that holds their annuity can check with an independent insurance rater to see how their policy holder rates.
If it turns out that research indicates your annuity is held by an institution that is in financial trouble, it is a good idea to call the state regulators and see what sort of safety net is in place. Then you can calmly evaluate the merits of selling the settlement versus leaving it where it is.
Staying Calm through the Storm
Panic and financial decision making are a toxic mix. In short, if you hold some type of structured settlement, selling it in a panic based on the latest news is never a good idea and a responsible broker would not advise you to do so. That said it is a good time to take stock of your situation. Is your annuity your only asset? How large is it? These are good questions in a time of uncertainty in the financial system.
Are All Your Eggs in One Basket?
Most financial advisors first piece of advice to consumers is to diversify. This can be as simple as in addition to investments, own your house or apartment. That way there is money in both the markets and real estate. The logic is if one sector crashes you may still have value in the other sector. If your settlement is your only asset, you may want to split it up to reduce your risk exposure. The great thing about selling a settlement is it doesn’t have to be all or nothing. You may sell off part of it, and in one fell swoop have the ability to diversify your assets and spread the risk around. This could allow you liquidity to survive a time of transition in your work, go back to school, or purchase real estate in a buyers’ market. You could still keep part of the settlement to guarantee that some type of income is still available if any of these ventures don’t work out.
This can all be very daunting to a consumer. At Sovereign Funding Group we will help you make an informed decision when you consider selling all or part of a structured settlement. Call us today at 877-836-4661.
