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Abels & Annes, P.C. Personal Injury Blog

Should I Take the First Offer of a Car Accident Settlement?

One of the first questions people ask after suffering an injury in a car accident is whether they can get a settlement for their damages. Financial compensation requires proving that someone else was responsible for your car accident. It is only after that money comes into play.

The Insurance Company Is Using the Settlement Process to Save Money

Should I Take the First Offer of a Car Accident SettlementAfter a car accident, you must do what is suitable for you and your family. Your financial interests are at stake. On the other side of the table is the insurance company with its economic interests. Car accident settlements are a zero-sum game between you and the insurance company. Any dollar in your pocket is one out of theirs.

Insurance companies have shareholders and owners who want their investment to succeed. Therefore, there is pressure on the insurance company to save money, and they will try to do it at your expense.

Getting the right amount of money after your car accident is an entirely different story. Even when liability is very apparent right off the bat, it is still a fight to get the check you deserve. In some cases, the insurance company is more than happy to settle a case when they pay you pennies on the dollar for your injuries.

The settlement process can be long and drawn out. Your focus is on getting the insurance company to the point where they are fairly compensating you for your damages. Note that the settlement process is about eventually reaching the point of fair compensation because it does not happen at first.

The insurance company is viewing the settlement process as a negotiation. Just like any negotiator, they will try to leave themselves some room to increase their offer in the future.

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The Insurance Company Will Begin Low and Gradually Raise its Offer

The insurance company is not like any other negotiator. They start with a natural advantage over you. Car accident companies have been dealing with claims for practically as long as cars have existed. They have had decades to fine-tune how they deal with and handle claims that they receive.

Any car insurance company will have legions of adjusters equipped with the latest software. Their programs can quickly determine how much your claim is worth based on what they see across the country and company. An insurance company will start the settlement negotiation with full knowledge of this number and try to settle the case for far less than that.

The Insurance Company Makes Money By Paying as Little as Possible

The insurance company’s motivation is to keep as much of its premiums as possible. Large insurance companies take in billions of dollars in premiums each year. They will invest the money in the stock market and other assets, and it earns returns until they need to pay out the money.

Settlement checks come from a fund that they maintain. Any money they do not pay out gets to stay invested, reinvested in the company, or given to shareholders as a dividend. For an insurance company, they want to hold onto its money. From their perspective, they prefer to have it in their pocket than put it into yours.

The insurance company will always make a low initial settlement offer. The more your claim is worth, the lower the initial settlement offer. Higher dollar value claims give the insurance company even more wiggle room for their negotiating tactics. If your claim is a valuable one, they may offer you what seems at first to be a lot of money. However, when you get into the nuts and bolts of the offer, you will realize how low the offer is.

In any car accident settlement, the law obligates the defendant to pay you for the damages they have caused you. Their contract requires that the insurance company defends them from any lawsuit. The duty to defend brings the insurance company into the picture. The insurance company is the entity that has the money because the average person who causes you injuries in a car accident does not have the liquid assets necessary to pay for your injuries.

What a Car Accident Settlement Must Include

Your car accident settlement should pay you for everything you lost in the accident. Not only have you suffered actual economic losses, but you have also sustained other damages that have robbed you of the quality of your life. The defendant must pay you for everything.

Car accident damages should include:

  • Medical bills – All medical costs associated with your car accident injuries in both the past and the future
  • Lost wages – Any money that you can have made by working that you cannot earn, including a reduction in the amount of time that you can work or your earnings capacity
  • Pain and suffering – This subjective damage measure compensates for what you endured after the accident, including physical pain and depression.
  • Loss of enjoyment of life – Your life may not be the same as before the car accident took hobbies and other things that you enjoyed beforehand.
  • Emotional trauma – The experience of the car accident may have caused you lasting psychological damage
  • Wrongful death – If your family member lost their life in a car accident, your family may seek compensation for your damages.

The Insurance Company Will Always Underestimate Damages in the First Offer

In this list of damages, there are many ways that the insurance company can undervalue your damages, and you can be sure that they will. After all, they are a for-profit entity in business to make money for its shareholders. They are not in business to put money into your pocket. To them, you are an entry onto the expense side of their balance sheet that gets in the way of the profit side of their ledger.

The quicker the insurance company makes an offer, the more likely it is a trap for you. Without an attorney, there is a high risk that you will fall into that trap.

Unrepresented claimants are far more likely to be taken for a ride by the insurance company.

There are two critical pieces of knowledge that they are lacking:

  • The actual value of their claim
  • The fact that you actually can negotiate with the insurance company

Not only can you negotiate with an insurance company, but it is what they are expecting from every claim. To them, it is a great day when someone takes an initial offer without negotiating because it means that they have boosted their bottom line.

An Attorney Will Negotiate with the Insurance Company on Your Behalf

When you hire an experienced car accident lawyer, they will know what to do when you get a settlement offer. Your car accident lawyer evens the playing field because they also know what your claim is worth. Before you file the claim with the insurance company, your lawyer has also calculated the value of your claim and has come up with a better starting point for negotiations.

Once the insurance company makes the initial offer, your lawyer will evaluate it and advise whether to accept it. Most likely, the initial settlement offer will not come close to paying your expenses. Accordingly, they will advise you to reject the settlement offer. Let your lawyer protect you against negotiation traps. If insurance companies are motivated to settle the case quickly, there is likely a reason for it.

What to Do When the First Settlement Offer Is Low

Once you learn how low the settlement offer is, you have two options:

  • Continue to negotiate with the insurance company
  • File a lawsuit in court seeking damages

In some cases, the settlement offer comes after you have already filed a lawsuit. Nothing prevents the parties from negotiating while the case moves forward in court. In fact, this is what happens in most car accident lawsuits.

Most claimants will continue to negotiate with the insurance company because they will eventually get closer to the right amount of damages through continued negotiation. At this point, your lawyer will come back to the insurance company with a demand letter that states your position and the money you need.

The demand letter is your counteroffer. Likely, this is one of many counteroffers that you will be making. Little by little, you will hopefully get closer to reaching a final settlement agreement with the insurance company.

The Initial Offer Is Just the Beginning of the Process

When you reject the insurance company’s initial offer, it automatically takes it off the table. However, this should not be a cause for alarm. The initial settlement offer is merely just a baseline for beginning negotiations instead of a serious attempt to compensate you for your injuries.

If push comes to shove, the insurance company will gladly settle your claim for this amount. You should see the initial settlement offer as a placeholder for future negotiations instead of a serious attempt to settle your claim.

You can expect multiple rounds of proposals and counter-proposals sent back and forth between you and the insurance company. Insurance companies almost always settle claims this way. If they are not, there is a greater chance that you are leaving money on the table. The more valuable your claim, the longer you can expect negotiations to take.

At some point, the two parties may find a way to settle the claim. Neither you nor the insurance company want to go to court. For you, it adds time to your case. The insurance company needs to pay litigation expenses to a defense firm because they do not have lawyers working for them on a contingency basis like you. Paying lawyers raises the insurance company’s cost of doing business, and that is very much something they prefer to avoid if possible.

How a Car Accident Lawyer Helps Your Case

From reading this, you should see the value that an experienced car accident lawyer adds to your case. Without one, you will be an easy mark for the insurance company.

On your own, you may not have a genuine concept of what money means in your case. You may see a settlement offer for $100,000 and think it is a lot of money. However, when that is just the amount of your past and future medical expenses, it leaves nothing left for you. If you accept that, you will end up in a bad place financially because you only get one chance to settle a car accident claim.

Your lawyer knows the rules of the road for dealing with an insurance company. They do this every day. You may never have dealt with an insurance claim before and not know how it works. An attorney is familiar with insurance company tricks, and their job is to protect you from them.

Negotiating with the insurance company requires certain degrees of fearlessness and a steady hand. When you have injuries and face financial difficulties, you cannot clearly think without emotion and fear.

While you can represent yourself to the insurance company, it is not a good idea. Settlement negotiations are all about money and how to get as much of it as possible. You need another set of eyes that has seen this all before.

Your own eyes may not see the situation clearly, without knowing what your case is worth. In the end, hiring a lawyer increases your chances of getting top dollar for your accident injuries. Your attorney will also spare you from the stress and difficulty of dealing with the insurance company.

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