For those people who are recipients of a structured settlement, they are entitled to receive an income stream of regular payments made over a given frequency for a set duration. If a person wishes to sell all or a portion of this income stream, a structured settlement calculator is used to determine the lump sum payment. Let’s discuss some factors used in this determination.

A number of things are evaluated when it comes to determining the lump sum price for a structured settlement. There are different types of structured settlement. Some are viewed as high risk while others are lower risk. This certainly has an impact on the value placed on this structured settlement.

In any case the first thing which needs to be done is to determine the amount of the regular payment, its frequency and duration. A seller may decide to sell only a portion of the income stream. They may also decide to break up the payment amount such that a portion of regular payment is made to them and the remainder made to the investor who purchases a portion of their structured settlement.

This payment amount, frequency and term are factored into a calculation. Using a desired rate of return, the calculator can determine what the lump sum payment should be. However this lump sum amount is generally adjusted based on different factors related to risk.

So as indicated earlier, the amount may be adjusted based on the type of annuity. If the structured settlement is based on winnings from a lottery drawing and backed up by a state agency, it is generally seen as a very secure income stream. However if another structured settlement is being made by a party which has a chance to default on the agreement, that is certainly viewed as higher risk.

Therefore the lump sum amount would be reduced to account for this risk. Or if the length of term for this structured settlement is fairly long, the amount may be adjusted down as well since this plays a part in the overall risk as well.

If you intend to sell all or a portion of your structured settlement, you should keep in mind that different companies and investors use different factors in their calculation of a purchase price. So it is generally a good idea to get more than one bid from different companies. This will help you to achieve the best possible price.

Related: types structured settlement, structured settlement securitization