Finding Buyers and Pricing Flashcards
6 cards from real Sell Structured Settlement practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Finding Buyers and Pricing flashcards as text
What is the role of a structured settlement consultant or broker who assists a payee in selling their payments?
Answer: They help the payee evaluate offers, understand the process, and navigate the transfer transaction
An independent consultant or broker helps the payee understand their options, compare offers from multiple buyers, and make informed decisions throughout the transfer process.
Why do factoring companies typically pay more for guaranteed structured settlement payments than for life-contingent payments?
Answer: Guaranteed payments will be received regardless of the payee's death, eliminating mortality risk
Guaranteed payments eliminate the risk that the income stream ends early due to the payee's death, making them more certain and therefore more valuable to the buyer.
How does the financial strength rating of the annuity issuer affect the value of structured settlement payments in the secondary market?
Answer: Higher-rated issuers produce payment streams valued more highly because there is less risk of default
The financial strength of the life insurance company issuing the annuity affects perceived credit risk; payments backed by highly rated insurers are considered safer and thus worth more.
What is 'accelerated funding' in the structured settlement purchase industry?
Answer: A service offered by some factoring companies to pay the lump sum faster after court approval
Some factoring companies offer to advance a portion of the lump sum before the court approval is finalized, charging additional fees or interest for this early funding service.
What percentage of the total face value of payments do payees typically receive as a lump sum in a structured settlement transfer?
Answer: 40–70%
After applying typical discount rates of 9–18%, payees commonly receive approximately 40–70 cents on the dollar relative to the total face value of the payments being sold.
Which of the following structured settlement payment types typically commands the highest lump-sum offer from factoring companies?
Answer: Guaranteed monthly payments beginning immediately and backed by a highly rated insurer
Near-term, guaranteed payments backed by a strong insurer command the highest values because they combine low credit risk, low mortality risk, and minimal time discounting.