Personal Injury

What If I Say No to the Insurance Company's First Car Accident Settlement Offer?

By David Goguen, J.D., University of San Francisco School of Law
You can—and almost always should—turn down the car insurance company's first offer to settle your car accident claim.

You've been injured in a car accident, you've filed a third-party claim with the at-fault driver's car insurance company, and now soon after the accident the insurer is offering to settle your claim for a few thousand dollars. Is this standard practice? Yes. Do you need to accept the offer? Absolutely not. In fact, saying yes to the car insurance company's first settlement offer is almost never in your best interest.

The First Offer Is Almost Always a "Lowball" Offer

Perhaps the two most important things to understand about the car insurance company's first offer to settle your car accident claim are:

  • it's almost certain to be a "lowball" offer, and
  • it's almost never going to be the insurance company's last offer.

The car insurance company isn't interested in making sure you get full compensation for all losses stemming from your car accident; far from it. The insurance company’s goal is to resolve your claim as quickly as it can, in the most cost-effective way possible. So think of the first offer as the insurer's most optimistic attempt at meeting its goal: it sends you an offer very early on in the process, in an amount that is the very definition of a "lowball offer," in the long-shot hope that you'll accept it, so that your car insurance claim can be closed at minimal cost to the company.

What Comes After the First Offer?

Once you understand the insurance company's angle, and you decline (firmly but politely) to accept their first offer, the insurer will likely regroup and come back with a second, higher (at least slightly) offer.

Around this time, you (and your attorney) will probably put together a formal car accident demand letter. This will include:

  • a description of the car accident, including discussion of why the insurance company's covered driver is clearly at fault for the crash
  • a detailed summary of all medical treatment you’ve received to date (including cost of treatment)
  • an itemized list of all other economic losses caused by the accident (lost income, cost of rental car, etc.)
  • a summary of how the car accident has impacted your life in non-financial ways, including emotional distress and any negative psychological effects of the crash (these kinds of losses are often categorized as "pain and suffering"), and
  • your counter-offer: a dollar amount you’d be willing to accept to settle your car accident claim.

(To get an idea of what this kind of correspondence might look like, see a sample car accident demand letter.)

Once the insurance company receives your demand letter/counter-offer package, this is when settlement negotiations will really begin in earnest. Your attorney and the insurance company's claims adjuster will likely talk on the phone a number of times and exchange correspondence in an effort to arrive at an agreeable settlement figure. During these discussions, your attorney will argue to keep the number close to your counter-offer, and the adjuster will advocate for lowering it.

Who Decides Whether to Settle?

When is it time to accept the insurance company’s settlement offer? It’s your case, so ultimately the decision is yours. But you hired your lawyer for his or her expertise, so it’s a good idea to put faith in the lawyer’s opinion as to the value of your car accident claim and the fairness of a settlement offer -- especially when measured against what’s likely to happen if you continue to fight (by filing a car accident lawsuit in court, for example).

Don’t Settle Until You've Healed

Putting aside the dollar figure attached to the car insurance company’s settlement offer, you (and your attorney) need to be sure that you’re at a point in your claim where it’s a good idea to accept any settlement.

One of the biggest questions that must be answered involves the course of medical treatment made necessary by your car accident injuries. Before you accept a settlement from the insurance company, you need to be sure you’re fully recovered from the crash. That’s the best strategy. In the alternative, you need to at least have a full understanding of:

  • the nature and extent of your injuries
  • the medical care you’ll require in the future, and
  • the anticipated cost of that future care.

Why is this so important? Once you sign a release and accept the insurance company's offer to settle, that's the end of your claim. You can't go back and ask for more money if a few weeks later you realize your injuries are worse than you first thought. (Learn more about the insurance company's release form and injury settlements.)

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