How Do Insurance Companies Determine Settlement Amounts?
The aftermath of a car accident is never easy. For those lucky enough to escape with minor injuries, the biggest issue becomes repairing the damage. And that involves dealing with the other driver, law enforcement, and insurance companies.
Depending on the type of coverage victims have, insurance companies are usually obligated to cover the costs of property damage and personal injury. However, the issue here is negotiating the amount. Insurance companies have their own way of determining the amount of money they’re going to pay out—and that amount may not always align with what injured parties deem appropriate.
Therefore, before accepting any settlement offer, injured parties should understand the basics of insurance settlements, chiefly—how do insurance companies determine settlement amounts?
How Does An Insurance Investigation Work?
Insurance companies function a lot like law enforcement. In the event of an accident, they will launch an investigation to understand the full extent of the accident. Companies use employees called claims adjusters to perform this task, and it is they who determine the insurance amount that the company will pay to their clients.
There are several things a claims adjuster will investigate, to come up with the amount they will end up paying.
1. Who Is At Fault
The first and most important step in the investigation is determining who is at fault. An insurance company will only pay out a settlement if the insured person is legally responsible to pay for the accident. How they determine who was at fault for the accident largely depends on the facts of the case, as well as specific state laws.
For example, since Iowa is an at-fault state, injured parties reserve the right to file a claim for both economic and non-economic damages after a crash. If the policyholder is legally liable, an insurance company will immediately process the claim. However, if the claims adjuster has doubts about who was legally liable, the company can offer a reduced settlement.
2. The Amount of Damage Sustained in the Accident
The next thing insurance companies look at is the amount of damage the victim sustained during the accident. This includes both personal injury, as well as damage to the victim’s vehicle. Some injured parties can also include proving their pain and suffering in this category, if they have the proper documentation.
3. The Type of Coverage
The last factor that determines the settlement amount is the type of coverage those involved in the accident have. For example, victims with third-party-liability-only coverage can get their insurance to cover the cost of repairing their vehicle after an accident. On the other hand, those who have personal coverage can get their insurance company to cover any medical expenses.
Insurance companies will pay up to the policy limit, even if the damages exceed that amount. They will also try to reduce the settlement amount for any applicable deductible, if for example, the claims adjuster can’t accurately determine liability.
Factors That Determine the Settlement Amount
It is no secret that insurance companies operate like businesses. Their primary goal is to make money. They will, therefore, seek out several key pieces of information that might affect the settlement amount.
1. The History of the Claimant
First and foremost, during a settlement assessment, claims adjusters will focus on the injured party. They will look at their history, to see whether they’ve filed a personal injury claim in the past. They will also try and dig up any incriminating information on the victim that might affect the settlement amount.
2. The Police Records
One of the biggest advantages of involving law enforcement in an accident is having the official paperwork. When going through accident reports, claims adjusters will diligently look for any information that might help them reduce the claim or deny it. They will have a harder time doing that with a thorough police report, than a personal account of the accident the injured party gathered themselves.
3. The Medical Records and the Type of Medical Care
The last thing a claims adjuster will examine is medical records. They will scrutinize every aspect of the medical record to uncover if the owner had any injuries before the accident. This can help them cast doubt on the owner’s claim or even prove that the owner is malingering.
They will also take into account the type of care the owner has received post-accident. If the owner received what insurance companies call ‘soft care,’ i.e. physical therapy or chiropractor visits, then the insurance company can attempt to pay out a reduced amount.
For victims asking how insurance companies determine settlement amounts, the answer is that it’s complicated. Insurance companies take into account legal liability, the type of coverage, and the extent of damage when investigating a claim. However, they will also consider other factors that might influence the settlement amount. These include the history of the owner, as well as the police and medical records.
To be fair, insurance companies don’t always have malicious intentions. They’re simply a business trying to protect their interests. So, to get the most out of their policy, victims should stay informed on the specifics of how insurance works.
To do this effectively, they should always turn to an experienced car accident attorney in Des Moines IA, like those at Tom Fowler Law—a practice dedicated to ensuring victims get the maximum compensation they deserve.