If you suffer injuries in an accident or another unfortunate incident, you may receive compensation to cover your related losses. Often, this compensation comes from settling with the insurance company.
But how do insurance companies calculate the value of a case and negotiate settlements? Understanding how the process works and what you can expect can help you take the right steps and protect your rights to fair financial recovery.
Types of Cases that Involve Insurance Companies
Usually, cases that involve injuries caused by another party require dealing with insurance companies.
Some common cases that typically require involvement from insurance companies include:
- Car accidents
- Trucking collisions
- Motorcycle accidents
- Bicycle crashes
- Premises liability claims, like slip and falls
- Pedestrian accidents
Of course, just because you’re injured and have a valid claim doesn’t automatically mean you’ll have to deal with an insurance company.
Usually, individuals in the above accidents carry insurance. For example, if you suffer injuries in a car accident claim, you can pursue compensation from the other driver’s insurance company. However, some individuals fail to carry insurance, even if it’s necessary, which can throw a wrench in your plans.
You’ll likely need to pursue financial recovery from an uninsured party and not their insurance company. Situations like this usually require filing a personal injury lawsuit in court.
Nonetheless, most parties in personal injury situations carry insurance, which means you’ll deal directly with insurers.
How to Initiate the Settlement Process
If you suffered injuries in an accident, you’ll need to take some necessary steps to start the settlement process.
In most cases, you’ll need to start by filing a claim. For example, you must file an insurance claim if you’re involved in a vehicular collision.
The claims process varies by state and state law. Some states are fault states, while others are no-fault states.
In a fault state, you will file a third-party insurance claim with the at-fault party’s insurer. On the other hand, in a no-fault state, you usually file a claim with your own insurance company.
You need to know your state’s laws and procedures is important, as these determine how to initiate the process.
Only after you file your claim can the insurance company begin working to get you a settlement offer.
It’s Helpful to Know What You Could Expect
Before you dive into settlement negotiations, you must understand how most insurance companies work.
The idea of settlement might sound great to most, but insurance companies make it rather challenging.
Insurers like their money, and will do everything necessary to protect it. Therefore, these companies can make settlement negotiations difficult, typically to get you to settle and close out your claim for good.
How Quickly You May See a Settlement Offer
Every case is unique, and the pace at which your case moves will likely differ from others. However, insurance companies want to settle quickly and will send you a settlement offer quicker than you may expect.
Right away, this may seem like a favorable situation. When you’re dealing with your injuries and see the medical bills rolling in, a rapid settlement may be what you think you want. Still, settling quickly may be the worst thing you can do for your case.
Among the many tactics insurance companies use to save money, a quick settlement is one of the most popular.
Unsuspecting victims may think insurers are doing them a favor by offering to settle and close out the claim. Still, the real reason insurance companies try to settle as fast as possible is to pay you less than what your claim is worth.
Usually, it takes some time to grasp the full extent of your financial losses after an accident and assign a monetary value to your case. Insurers know this. Before you’ve even gotten the chance to calculate your damages, they present a figure hoping you’ll just accept.
The biggest problem with accepting the initial settlement is forfeiting your right to more money in the future. Once you sign the insurance company’s settlement documents, you cannot ask for additional compensation later on.
For these reasons, personal injury attorneys always advise clients to wait it out and not give insurance companies a “yes” right away.
If you receive a settlement offer, you should first take it to a lawyer. An attorney can determine the value of your case and compare it to your offer to decide whether you should accept it. If it is not, your lawyer can then engage in settlement negotiations on your behalf.
How Insurance Companies Determine the Value of Your Claim and Negotiate a Settlement
Insurance companies have their own methods for assigning a value to your case. While a settlement offer might not correctly reflect the extent of your damages, they still investigate your accident to determine how much your case is worth in the eyes of the insurance company.
An Adjuster Works on Your Case
After you open your claim, the company will assign an insurance adjuster to your claim.
Insurance adjusters play a crucial role in the settlement process. They are usually your point of contact once your claim is open and active.
The Adjuster Conducts an Investigation
Insurance adjusters take on several tasks, but the most important is investigating your accident. The investigation yields the answers the adjuster needs to help calculate the value of your claim as they see it.
Insurance adjusters gather as much information about the collision as possible during their investigation. They want to know everything from where and what time it happened to the damage and injuries that resulted.
To aid in their investigation, they’ll gather evidence, which can include the police accident report and even your medical bills. In addition, the adjuster may call you to try to get your side of the story.
The Adjuster Determines How Much Your Claim is Worth to the Insurance Company
Adjusters use the information gathered during their investigations to assign a monetary value to your accident.
To calculate a figure they deem fair, they pay close attention to certain details, including:
- The cause of your collision: When someone causes an accident, their insurance should pay. Still, even if their insured caused your accident, the insurance company won’t make it that easy. Don’t be surprised if they limit their liability and shift at least some of the blame onto you.
- Your resulting injuries and losses: For the most part, the more severe your harm, the more your claim is worth. Still, insurance companies don’t typically offer what your injuries and losses are truly worth.
- Policy limits: Policy limits play a significant role in your settlement offer. Insurance companies will not offer more than their insured’s limits. For example, if the bodily injury coverage is $20,000, they won’t offer you more than this, even if your injuries are worth much more.
Insurance companies and their adjusters have a special skill for finding ways to devalue your case and offer you less than what’s fair. For this reason, settlement offers are usually not what you expect them to be or what is favorable considering your situation.
The Insurance Company Makes You a Settlement Offer
Once the insurance adjuster has determined how much they believe your case is worth, they’ll send you a settlement offer.
While it may be tempting to accept their offer, get your money, and move on with your life, it’s always best to wait. Do not make any fast decisions without first speaking with your lawyer for valuable guidance.
You Don’t Have to Accept the Insurance Company’s Initial Offer
Here’s the thing: You’re under no obligation to accept the insurance company’s initial settlement offer.
When injured victims don’t have legal counsel, they often don’t know better, and insurance companies know this. They assume that when you see the dollar signs, you’ll quickly sign on the dotted line to get your check.
This is one of the most important reasons for hiring a skilled attorney. A lawyer will never let you accept the first settlement offer without doing their due diligence and calculating the actual value of your case – not the insurance company’s version of how much your case is worth.
Don’t let the insurance company pressure you or make you feel like you must act immediately or lose the chance to recover monetarily. They know what they’re doing, but when you have a lawyer helping you, you’ll also know what you’re doing.
What Happens if You Can’t Settle?
While reaching a fair settlement is the goal, it’s not always possible. But that’s okay.
Just because you don’t settle with the insurance company right away doesn’t mean all hope is lost forever. If you cannot settle for one reason or another, your lawyer can determine your next best step.
Often, the following takes place.
The Demand Letter
While the insurance company can send you a settlement offer, you may not want to accept it. The demand letter is almost like your attorney’s version of an initial settlement offer.
The demand letter includes information regarding your accident, including the extent of your injuries and losses and an explanation as to why the insured is at fault for the collision.
At the end of the letter, your attorney can include a more realistic figure that covers your injuries and related losses. They may also add documentation to strengthen their demand.
Once the insurance company receives the letter, they can determine how to proceed. They can either accept your attorney’s request, counteroffer, or refuse to settle.
Filing a Lawsuit
In some cases, demand letters are all that’s needed to get the insurance company to cooperate and finally settle for a fair amount. In others, demand letters don't yield the results clients hope for.
If your attorney’s demand letter does little to motivate the insurer to settle, you may need to move on to a bigger step and file a personal injury lawsuit.
Filing a lawsuit involves crafting a petition to open your case in court. Once you’ve filed your documents, you provide the opposing party copies of your filing as notice of the impending lawsuit.
The defendant must then file their response to your petition in court. After this happens, the lawsuit can proceed.
Pre-Trial Settlement Negotiations
At any time during your lawsuit, you have the opportunity to settle with the insurance company. All it takes is cooperation from both sides.
During the lawsuit, both sides request and obtain information from each other to build their cases. Once everyone has what they need, this often opens the door to revisiting settlement negotiations.
A majority of personal injury cases settle before they reach trial. Still, a small percentage of cases do go to court when attorneys feel that is the right move.
Trial
If your case reaches trial, you can feel confident knowing your attorney will continue to represent you to the best of their abilities.
After your trial, the judge or jury can decide the fate of your case. If you receive a monetary award, you can receive a check from the insurance company, and your case is officially closed.
Allow a Personal Injury Attorney to Handle Your Settlement Negotiations
Settlement negotiations are a critical part of an injury claim. Successful negotiations can mean you receive money for your losses quicker and with less stress. Therefore, have an experienced lawyer handle the negotiations on your behalf and fight aggressively for your right to favorable compensation.
Even with a strong negotiator on your case, settlement negotiations might fall through due to insurance companies. For this reason, you also want a skilled litigator as your lawyer.
Before taking any steps with your claim, consult a knowledgeable personal injury attorney for assistance.
