Overview

Often, individuals are awarded annuities as a result of a lawsuit (such as a personal injury award) or winning a state lottery. Sometimes these individuals do not want to wait, or cannot afford to wait, years for their entire payouts. They can elect to sell their future payments to someone else in exchange for a lump sum payment today. The “resale” of these annuities are Secondary Market Annuities (also called Secondary Market Fixed Annuities, Secondary Market Immediate Annuities, Secondary Market Income Annuities, of factored structured settlements).

Where Do These Annuities Originate?

You’re probably aware that when someone wins a state lottery, they don’t get the entire amount all at once. They can take a much smaller lump sum, or they can elect the entire amount paid as an annuity — a promise of a series of payments over time (for the case of a lottery, usually ten to forty years). Likewise, when you hear about someone winning a legal settlement, such as a personal injury lawsuit, often they settle not for a lump sum, but for a promise of regular future payments — again, an annuity. The payment of these annuities are safe and dependable — personal annuity receivables are direct obligations of insurance companies such as MetLife, John Hancock, Pacific Life, Allstate, Prudential, The Hartford, Aegon, and other A and AA rated carriers. Annuities from lottery winnings are all the direct obligations of state lotteries, and pre-defeased with US Treasury instruments maintained in segregated trust funds.

Often, the individuals who end up with these annuities from lawsuits or lottery winnings do not want to wait, or cannot afford to wait, years for their entire payouts. They can elect to sell their future payments to someone else in exchange for a lump sum payment today. The “resale” of these annuities are Secondary Market Annuities.

Investment Opportunities in Secondary Market Annuities

You can purchase a secondary market annuity from the original owner at a discount, and have the stream of income or lump sum payment(s) assigned to you. These plans will typically offer a rate of return well above standard fixed annuities, immediate annuities, CDs, or bonds of a similar credit quality. This increased yield is created through the original owner selling these payments at a discount, not the insurance company paying the higher specified rates. The insurance company is obligated to make these payments regardless if it is to the original owner or the new investor. When these income streams were originally issued they were issued at current market rates. Many investors often wonder how the insurance company can afford to pay such high rates of return. It is important to understand how this yield enhancement is created as it is purely through the mechanics of the factoring process and the existing owner’s willingness to sell their payment stream at a discount.

How Can You Get More Information, Or Purchase Secondary Market Annuities?