Diversification is an important strategy for investors looking to minimize risk and maximize returns. This strategy involves investing in a variety of different assets, with the aim of reducing the impact of any one underperforming asset on the overall portfolio.

Structured settlements offer investors a unique opportunity to diversify their portfolios. These investment vehicles provide a steady income stream over a fixed period of time, which can help to balance out the more volatile investments typically found in a diversified portfolio.

What is a structured settlement?

Structured settlements are agreements between parties involved in a legal settlement, whereby the plaintiff (the injured party) receives a series of payments over a set period of time, rather than a lump sum payment. These payments are typically funded by an annuity, which is purchased by the defendant (the party responsible for the injury or damages).

Structured settlements can be customized to suit the specific needs of the recipient, with payments often spread out over a period of years or even decades. This can provide a stable source of income for individuals who have suffered serious injuries or financial damages, making it a popular choice for personal injury and medical malpractice cases.

Why invest in structured settlements?

Structured settlements offer a number of benefits to investors. Firstly, they offer a guaranteed income stream over a set period of time, which can help to reduce the overall volatility of a portfolio. With a fixed schedule of payments, investors can forecast their income stream and plan their finances accordingly.

Secondly, structured settlements are typically backed by large and reputable insurance companies, which means that investors can have more confidence in the reliability of their returns. These companies have a long history of paying out annuity payments, and are required by law to maintain sufficient reserves to cover their obligations.

Finally, structured settlements are often tax-efficient, with the income generated by the annuity payments typically taxed at a lower rate than other types of investment income. This can help to further increase the return on investment for investors.

How to invest in structured settlements

Investing in structured settlements requires a degree of expertise and knowledge about the industry. Typically, investors will work with a structured settlement broker or financial advisor, who can help to match them with suitable investments.

The key to successful structured settlement investment is to choose a mix of different settlements, with varying payment amounts, durations and payers. This can help to balance out the risks and rewards of each investment, and ensure a steady income stream over the long-term.

It is also important for investors to carefully vet the insurance companies backing the structured settlements they are investing in. This includes reviewing the company’s financial strength and credit rating, as well as their track record in paying out annuity payments.

Risks associated with structured settlement investments

Like all investments, structured settlements come with risks that investors need to be aware of. Firstly, the payments are typically fixed and cannot be adjusted, which means that investors may miss out on potential gains if interest rates rise.

Secondly, structured settlements are illiquid investments, which means that investors may have difficulty selling or transferring their investments if they need to access their funds quickly.

Finally, there is always the risk that the insurance company backing the structured settlement may become insolvent or otherwise unable to meet their payment obligations. While this risk is relatively low, it is important for investors to consider it when making their investment decisions.


Diversification is an important strategy for investors looking to reduce risk and maximize returns. Structured settlements offer a unique opportunity for investors to diversify their portfolios, providing a steady income stream over a fixed period of time. With the right mix of settlements and careful vetting of insurance companies, structured settlement investments can provide a reliable and tax-efficient source of income for investors looking to balance out the more volatile investments in their portfolios.