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How Do Insurers Formulate a Claimant’s Settlement Amount?


If you’ve suffered damages as a result of an auto accident, you are most likely going to contact an insurer–either yours or the at-fault party’s–for compensation. The majority of accident claims are resolved via settlement with an insurer, and claimants often ask how exactly their settlement figure is calculated. There are multiple factors to consider, which we will touch on below. However, with regards to settlements in general, your best resource is always going to be an experienced car accident attorney–thankfully for accident victims, Van Law Firm is standing by to answer any claim-related questions you may have. Call our office nearest you today to learn more. 

Factors That Go Into An Insurer’s Settlement Offer

By and large, there are three main elements that determine the settlement amount offered by insurers: the liability for the accident, the severity of the resulting damages, and the language of the policy itself. For starters, the fault for an accident must be clearly established in order for an insurer to consider offering a settlement. Second, insurers must have an idea of the total amount of a claimant’s damages in order to determine the amount of potential compensation. Finally, the policy itself must be reviewed to see what types of coverage are applicable or not. These are the primary factors that an insurer will need to consider when determining a settlement figure. 

Liability For Auto Accidents 

The legal liability for an accident is the first thing that an insurance company will consider when entering negotiations. Regardless of what they may say, insurers are like all other businesses in that they will not pay fees unless they are legally obligated to. So, that means that they will only consider offering a settlement if they have a contractual obligation to compensate their insured, or if someone was injured by their insured. 

The state you live in will also affect this process, as all jurisdictions are considered to be either at-fault or no-fault states. In no-fault states, you can only collect compensation for an accident from your own personal insurer, whereas at-fault states allow you to recover damages directly from liable parties as well should you choose to do so. Third-party negotiations are typically much more contentious than first-party cases, as there is no contractual obligations between claimants and third-party insurers. 

Car Accident Damages 

After the fault for an accident has been established, insurers will then review the claimant’s damages in order to gauge the actual settlement value. The term “damages” refers to both the financial and non-financial losses that a claimant has sustained after an accident. Financial losses typically include medical bills and property repairs, whereas non-financial damages include things like pain and suffering, loss of enjoyment of life, or disfigurement. Generally, attorneys advocate for all forms of compensation and insurers try to avoid them all–the meeting point is usually somewhere in between. 

The Language of the Policy in Question 

Lastly, the policy of the liable driver will play a large factor in determining a settlement value, as insurance companies will not exceed the policy limits when settling a claim. In other words, if you have $50,000 worth of damages but the policy limits in question are only $25,000, the insurer will not offer anything more. Not only that, but they may look for any deductibles that may be applicable. This is why it is crucial to consult with a trusted car accident lawyer following an accident, so that you know exactly what to expect when it comes time to settle. 

Questions About Accident Settlements? Contact Van Law Firm Right Away

If you’ve got questions about a potential accident settlement, or if you would like to schedule a risk-free consultation with award-winning car accident lawyers, simply call the Van Law Firm office nearest you today. We’ve got the expertise and the resources to handle any case effectively, no matter the circumstances or parties involved. With over $50 million recovered so far and over 500 5-star reviews, our reputation for excellence is only growing stronger. Call today for more information.