If you’ve ever been involved in a car accident that wasn’t your fault, you know the offending driver’s insurance company will typically reach out to you with a settlement offer in the days or weeks following the accident. This offer will likely cover most (if not all) of the property damage you sustained, and may cover any medical expenses you incurred as a result of the accident. Taking this offer often prevents you from taking any further legal recourse, and stands as your total compensation for the accident.
Most drivers take these offers without thinking twice, assuming it’s the best deal they’re going to get. However, these settlement offers are usually much lower than they should reasonably be.
Why Insurance Company Offers Are Low
There are a few reasons why insurance company settlement offers tend to be lower than the actual compensation you deserve:
Insurance companies aren’t interested in you. First and foremost, insurance companies aren’t here to serve you or make you happy. Your doctor’s job is to find a series of strategies or treatments that ultimately make you feel better. Your mechanic’s job is to fix whatever is wrong with your car, making sure it operates as intended. But insurance companies aren’t created to maximize the quality of life of the people they end up paying; instead, they’re constructed to remain as profitable as possible.
Claims adjusters are incentivized to minimize payouts. Claims adjusters, who are largely responsible for coming up with settlement offers, are incentivized to minimize the payouts they provide, for multiple reasons. The most obvious incentive here is profitability; insurance companies are on the hook for compensating drivers and pedestrians for damages caused by their customers. If they gave away money without much consideration or scrutiny, there’s no way they’d be able to continue operating with a profit. If half of drivers accept a low payment, the company saves a ton of money.
Calculations often don’t consider the future. Insurance companies need to take many factors into consideration, including the extent of the physical damage to your vehicle and the cost of your medical expenses. However, they aren’t good at predicting what costs you might face in the future due to this collision. For example, if you suffered a broken arm in the accident, they might readily pay your hospital expenses, but they may fail to compensate for the physical therapy costs associated with your long-term recovery. This is partially because these costs are hard to predict or project, and partially because insurance companies feel they can get away with avoiding them.
Non-economic losses are hard to calculate. Insurance companies also have trouble calculating the non-economic losses a person may sustain in an accident. For example, during and after the accident, you likely experienced moderate to severe pain and suffering; you had to deal with mental anguish from your injury, and might still be struggling with additional stress and anxiety due to the effects of the accident. These are subjective feelings, but that doesn’t make them insignificant.
A starting point for negotiation. In many cases, insurance companies are willing to pay people more than their initial settlement would imply. They’ve done the math, and are economically comfortable providing more money for the losses this person sustained. However, they need to provide a lower offer initially to provide ample room for negotiation. In other words, they almost expect you to come back and demand more compensation, and are merely giving themselves more wiggle room on the matter.
What You Can Do About It
Sooner or later, you’ll likely be involved in a car accident that isn’t your fault. When you do, you’ll likely receive a settlement offer that’s much lower than what you rightly deserve. If and when this happens, what can you do to get more money?
One of the best things to do is talk to a lawyer about your options. You’ll have a few potential routes forward, but because local laws vary tremendously and because every case is different, only a professional lawyer will be able to guide you on the possible directions ahead of you (and best practices to help you get the most out of this). In many cases, you can negotiate with the insurance company for a higher settlement offer. In other cases, you may want to sue the driver (and the insurance company) for a higher payout.
There isn’t a single answer here, since your best path forward will heavily depend on the details of your case. Gather all the evidence you have, including the extent of your injuries and sustained damages, and talk to a lawyer as soon as you can. Most lawyers offer free initial consultations, so you’ll have nothing to lose.