How Insurance Companies Calculate Settlement Offers

Being hurt in an accident someone else caused may leave you wondering about the value of your potential insurance settlement. How do insurance companies determine settlement amounts? What factors do they consider, and how can you ensure you receive fair compensation for your losses? Understanding the settlement process can help you make informed decisions and fight for the money you deserve.

What is a Settlement Amount?

A settlement amount is the sum an insurance company offers to resolve a personal injury claim out of court. The settlement aims to compensate the injured party for their losses, such as lost wages, medical bills, property damage, and pain and suffering. If you accept the settlement offer, you typically must sign a release agreeing not to pursue further legal action against the insured party.

Factors That Influence Settlement Amounts

How do insurance companies determine settlement amounts? Insurance companies consider various factors when calculating settlement offers, including:

Liability

The first thing an insurer looks at is who was at fault for the accident. The settlement offer may be higher if the insured party is liable. If the liability of the parties involved is disputed or shared, the offer may be lower.

Policy Limits

The coverage available under the at-fault party’s insurance policy can limit the settlement amount. For example, if the insured has a $50,000 liability policy and your losses exceed that amount, the insurer is only obligated to pay up to the policy limit.

Severity of Injuries

Severe injuries heavily influence your settlement amount by driving up medical bills, lengthening recovery times, and causing more pain and suffering. These factors all justify a larger settlement for you.

Medical Treatment

The cost of your medical treatment, such as hospital stays, surgeries, medications, and therapy, is a key factor in your settlement. The more extensive and lengthy your treatment process, the higher your potential settlement.

Lost Wages

If your injuries kept you from work, your settlement should include compensation for your lost income. The insurance company will consider your wage history and how much work you missed due to the accident.

Property Damage

If your accident resulted in damage to your vehicle or other belongings, the settlement process will factor in the expenses associated with getting them back in working order or replacing them entirely. This ensures your compensation directly addresses the financial burden of repairing or replacing these damaged items.

Pain and Suffering

Insurance companies use a multiplier to estimate pain and suffering damages. They multiply your economic losses by a number between 1.5 and 5, depending on the severity of your injuries. More severe injuries typically lead to a higher multiplier and a larger payout for pain and suffering.

Other Damages

Your settlement may also include compensation for other losses, such as emotional distress, loss of enjoyment of life, or loss of consortium (damage to your relationship with your spouse).

How Do Insurance Settlements Work?

How do insurance companies determine settlement amounts? The settlement process begins when you file an insurance claim following an accident. The insurance company will assign an adjuster to investigate your claim and determine liability. The adjuster may ask for documentation and gather evidence of your losses, such as medical bills, wage loss statements, and repair estimates.

After reviewing your claim, the adjuster will make an initial settlement agreement offer. This first offer is often low and may only partially account for your losses. You have the right to reject the offer and negotiate for a higher amount of personal injury settlements.

This is where having an experienced personal injury lawyer can make a big difference. Your attorney can compile evidence of your losses, draft a detailed demand letter justifying a higher settlement, and negotiate aggressively with the insurer on your behalf. In many cases, the mere involvement of a lawyer is enough to increase the insurance company’s offer.

If negotiations stall or the insurer refuses to make a fair offer, your attorney may recommend filing a personal injury lawsuit. The threat of litigation often spurs insurers to increase their settlement offers to avoid the expense and uncertainty of going to court. Finally, an experienced lawyer can advise you on when to accept a settlement versus when to push for a higher amount or take your case to trial.

Contact Gatti, Keltner, Bienvenu & Montesi, PLC for Help with Your Claim

At Gatti, Keltner, Bienvenu & Montesi, PLC, we know how frustrating it can be to deal with the insurance company after an accident. You’re trying to recover from painful injuries, but the insurer keeps lowballing your settlement. Or worse, denying valid personal injury cases. Our compassionate Memphis personal injury attorneys are here to level the playing field and fight for the full and fair compensation you deserve.

If you’ve been hurt in an accident, don’t accept less than you deserve. Call (901) 526-2126 today or contact us online to schedule a free consultation. Let our legal team put our experience, resources, and dedication to work for you. Consequently, we’re here to help you win your case and get your life back on track.

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