How Do Insurance Companies Determine Car Accident Settlement Amounts?

Insurance companies use the following three variables when determining car settlement amounts:

  • Liability
  • Damages
  • Terms and limits of insurance policy

Assuming liability is clear, the insurer’s claims adjuster establishes the value of the victim’s losses relative to policy limits.

All of the above factors come into play when insurance companies determine the value of car accident injury settlements.

What’s In This Guide:

    Fault in car accidents

    No insurance company will offer you a personal injury settlement unless they are legally responsible to pay for the accident and any related damages. This means the first thing the insurance company examines is legal fault.

    All cases differ and so do state laws concerning who is legally responsible for an accident. Under the no-fault insurance system, insurance companies are obliged to pay the insured driver directly for any damages sustained. Under the fault or tort system, by contrast, liability needs to be established.

    Assuming the driver is deemed legally responsible for the accident, the insurer will process the claim. In the event of any reasonable dispute over liability, the insurer often offers a reduced settlement.

    Car accident damages

    When legal liability has been established, the insurance provider assesses damages, including:

    • Medical bills
    • Damage to the vehicle
    • Pain and suffering

    Retaining an experienced accident injury attorney will help ensure you include a complete claim to the insurance company, maximizing your potential settlement value.

    Auto insurance coverage

    The final component insurance companies consider when determining car accident settlement value is auto insurance coverage. Any insurer will only pay up to the coverage limits of the policy in question.

    If there is a deductible in place, the settlement will be correspondingly reduced.

    This means that if damages exceed policy limits, the settlement amount is limited.

    In a no-fault state, your insurance extends coverage up to specified limits for the following:

    • Personal injury
    • Damage to the vehicle
    • Lost wages

    This coverage applies regardless of who is responsible for the accident in no-fault states.

    In tort states where a fault system applies to auto insurance, your settlement will be made by the insurer of the responsible party, up to the limits of that policy.

    Now you know how insurance carriers determine car settlement amounts, how long does it take to receive compensation?

    How long will it take to obtain a settlement offer after an auto accident?

    After you file your claim, the insurer’s claims adjuster will examine documentation and evidence of your damages and medical bills before offering you an initial settlement.

    If this initial offer is reasonable, your attorney may advise you to accept the offer. In the more likely event of a lowball opening offer, your attorney will enter into negotiations with the insurer, aiming to get you the compensation you deserve.

    The claims adjuster will investigate the following aspects of your claim:

    • Police report
    • Interviews with witnesses and other parties involved in the accident
    • The accident scene
    • Inspection of vehicular damage
    • Medical records – you may need to sign a release form to facilitate this
    • Medical providers for information regarding injury-related expenses
    • Evidence of lost earnings
    • Social media accounts

    In tort states, the adjuster will also need to establish who is at fault for the accident.

    What can you do if you receive a low settlement offer?

    An insurance company is a business committed to maximizing profits. Substantial claims hurt these profits.

    Beyond this, there are sometimes specific reasons for a lowball initial settlement offer. These can include the following:

    If you were driving under the influence, racing, or intentionally crashed the vehicle.

    The insurer under-calculates your losses by undervaluing your claim.

    Although uncommon, occasionally insurance companies act in bad faith and make a lowball offer in the face of demonstrable evidence for a stronger settlement.

    What can you do if you receive an unreasonable initial settlement offer, then?

    To counter a low initial settlement offer, it pays to understand why the insurer is lowballing you. If you know the reason for this low offer, you can gather evidence to help persuade the insurer to reconsider. Often, insurance companies simply overlook evidence relevant to your claim.

    There are three possible options if you receive a settlement offer you consider to be unfair and unreasonable:

    1. Accept this lowball offer, understanding that you will be unable to seek further compensation.

    2. Negotiate with the insurer to arrive at a more favorable settlement.

    3. Pursue the matter in court if necessary.

    It is never advisable to simply accept a settlement you feel is unreasonably low.

    Your attorney will be experienced in negotiating with claims adjusters and may convince the insurer to increase their settlement offer.

    If negotiations prove fruitless, your attorney can help you to prepare a lawsuit. Even if you file suit, there is still a strong chance the insurer will review their settlement offer in an attempt to settle out of court.

    There are also some things to avoid when presented with a low initial settlement offer for car accident-related injuries.

    Never accept a lowball initial settlement in the belief this gives you partial payment for your claim while you attempt to recover more compensation. Once you accept any settlement offer, you forfeit the legal right to pursue any further damages for this claim.

    Even if you feel the insurer is resorting to delaying tactics, do not give in to frustration and do not succumb to any pressure to accept an unreasonable settlement offer.

    The single most valuable thing you can do to maximize the value of a car accident injury claim is to retain an experienced attorney. The contingency basis of fees means you won’t need to pay anything out of pocket, and a lawyer will help you to get more compensation than if you try to negotiate this process alone.


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