Secondary Market Annuities can offer a higher rate of return than a traditional fixed annuity, certificate of deposit, and an indexed annuity. Secondary Market Annuities are offered and paid to the investor directory from insurance companies regardless if you are the original owner or not. This article will answer the 3 most popular questions about these annuities.
What is a Secondary Market Annuity?
You might have seen the many commercials on TV that offer to buy an annuity or structured settlement for a lump sum payout. Some people are awarded a payment for a certain amount of years or for life because of a personal injury settlement. Often times people cannot afford to wait that long to receive the funds and opt. to sell their payments for a lump sum payment in cash.
When a client resells their annuity or structured settlement, this creates a secondary market for those annuities. An everyday example is lottery winners. They can take a payment for 30 years or take lump sum cash payment now for a lot less than the total amount of winnings.
Who Makes the Payments?
As mentioned above, when someone sells their annuity or structured settlement for lump sum cash payment, this creates a secondary market for those annuities. Annuities are sold by life insurance companies. Life insurance companies are the safest and some of the oldest institutions in the world. These companies included Prudential, MetLife, John Hancock, and many others.
These companies do not care who they make the payments to. They are obligated sometimes by law to make the payments to the original owner or the new owners. What this means to you is that those payments are steady and guaranteed which helps a lot of people sleep good at night knowing their money is backed by in insurance carrier.
How Can I Make Money?
The Secondary Market for annuities can and will provide potential investors with a higher yield than traditional annuities and certificate of deposits. Since the annuity is sold for pennies on the dollar, there is a huge spread which means a higher yield to the new investor.
Some of the options for these annuities included waiting to take the income at some point in the future. Often times the contract will begin payments in 1-20 years down the road. The nice thing about these contracts is that you can choose the yield, duration, insurance company, and when the payments begin. These contracts change on a daily basis because there are more investors than available contracts. If you find something you like, you will have to make a decision quicker than purchasing a traditional annuity.