Annuities and Cash Flows: The Basics

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We have all seen the commercials late at night asking if you want to cash out your annuity, structured settlements, and so forth but what are those things in the first place and how do you know if you have one?

An annuity is a certain amount of money that you are receiving over a period of time, typically more the three years, and on a regular basis. If you were injured in a car accident and the insurance company pays you but only in smaller installments those are also considered an annuity and more likely then not, a structured settlement. You can receive the money all at once and stop waiting for it by hiring one of those late night advertisers if you wish, but business's like the ones on the TV normally charge a substantial fee based on the amount of money you are going to receive.

Cash flow is a term that describes a contract that requires some one to pay another a certain amount of money over a certain amount of time. They are commonly called IOUs but that is not the proper terminology. If you in possession of Cash flow then you are in possession of a type of annuity because you are receiving funds over a certain period of time. Though most of these Cash flows are contracts that lay out mortgage terms like you signed for when you got your mortgage. If you are in possession of a cash flow then you are like a banker because you are collecting the funds with an agreed interest from the buyer or the person that owes you, instead of the bank.

Many people don't like to be in possession of a cash flow these days because it can be a hassle especially if the person who owes you money doesn't pay you back like they agreed to. So you may want to sell it or get the money they owe without having to go through legal proceedings. If you have a cash flow you can sell it and receive the full amount of money that is owed on it in cash or check which ever you prefer. There are plenty of willing buyers and investors who have the time, the means and the legal backing to secure them unlike many of us. Which, it is for that reason many people started borrowing from the bank to take the pressure off one person with no means to make sure that they don't get screwed.

In other words, having an annuity is having money coming to you for one reason or another that compensates for a cash flow or agreed settlement. So if you need the full amount of your annuity you can find many, many companies that will be willing to give you what you want but be sure to read the Terms and Agreements carefully before doing so.

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