The Insurance Negotiation Process
If you file a personal injury claim with an insurance company after an accident, you must be prepared to negotiate a settlement with the claims adjuster. Negotiating a settlement is part of the personal injury claims process, which begins when you report your injury to the insurance company and file a claim. If you decide to accept the insurance company’s settlement offer, the personal injury claims process will end at that point. In the alternative, you may reject the insurance company’s offer and decide with help from a personal injury lawyer that filing a personal injury lawsuit is necessary.
This page provides basic information about the personal injury insurance settlement negotiation process. It may not apply to you, and is not a substitute for consulting with an experienced personal injury lawyer.
Only a licensed attorney in your area can give you legal advice about your situation. Although it may be possible to secure a favorable insurance settlement on your own, hiring a personal injury lawyer offers you the best chance at receiving the maximum amount of compensation for your injuries and other losses after an accident.
The Personal Injury Claim Process
The personal injury claim process begins when you report your injury and initiate a claim with the at-fault party’s insurance company (or with your own insurance company in the event of a first party claim, such as when the at fault driver did not have insurance or had inadequate insurance), and ends when you decide to accept or reject the final settlement offer from the insurance company’s claims adjuster. It is helpful to think of negotiation as part of the entire personal injury claim process. At each step, you should be advocating for the highest possible settlement. The claims adjuster will be trying to diminish your claim in an effort to pay you as little as possible.
You should become familiar with the basic negotiation steps discussed below. The more familiar you are with the personal injury claim process, the better prepared you will be to negotiate a settlement that fully accounts for your injuries and other losses.
Steps to Negotiating a Personal Injury Settlement
Although all insurance companies handle personal injury claims differently, the settlement negotiation process will look something like this.
1. You file a personal injury claim with the insurance company
The first step in your personal injury claim is notifying the at-fault party’s insurance company about your accident and injuries. You do this by filing a claim with the insurance company. Most insurance companies allow you to file a claim over the phone or by filling out an online form. You should file a claim as soon as possible after an accident, as many insurance companies require you to do so within 24 hours after an accident. Filing a claim effectively begins the settlement negotiation process.
2. You receive a reservation of rights letter from the insurance company
In response to filing a personal injury claim with the at-fault party’s insurance company, you will receive a “reservation of rights” letter from the insurance company. The reservation of rights letter will indicate that the insurance company plans to investigate your claim and will discuss it with you, but by doing so they are not admitting to any liability for your injuries on behalf of their insured (the at-fault party). It is important to fully understand the implications of the reservation of rights letter. If you have questions about the letter, you should contact the insurance company or a qualified personal injury lawyer.
3. You send a demand letter to the insurance company
As soon as you are sufficiently healed from your injuries, you can send a demand letter to the at-fault party’s insurance company. Your demand letter should lay out the basic facts of what happened in your accident and how badly you were hurt. It should also itemize your damages, including medical bills, out-of-pocket expenses, and lost income. These damages are known as your “special damages” (or “specials”). To learn more about different types of compensation for personal injuries, click here.
Once you have calculated the total amount of your special damages, you will multiply this amount by a number between two and five to reflect your pain and suffering. This figure is otherwise known as your “general damages.” The combined amount of your special damages and general damages will be your total settlement demand.
To learn more about writing an effective demand letter, click here
4. The claims adjuster will respond to your demand letter
After you send a demand letter to the at-fault party’s insurance company, you will receive a response from the claims adjuster. The claims adjuster may call you on the phone to discuss his or her initial offer, or send you a written letter containing an initial settlement offer. At this point, the real negotiations begin.
The claims adjuster will try to convince you that your claim is worth much less than your total settlement demand. The claims adjuster may try to say that your special damages are far too high for the type of accident you were involved in. He or she may try to pressure you into accepting a low offer right away by claiming it is a one-time offer. You may be told that your settlement demand exceeds his or her “authority,” which refers to the maximum amount the claims adjuster’s supervisor will allow your claim to settle for.
Do not be alarmed by a low settlement offer. You should never accept a settlement offer that does not fairly account for your injuries and other losses. By making a lowball offer, the claims adjuster is testing you to see if you are impatient enough to accept the initial offer. The claims adjuster wants to see if you really understand how the personal injury claim settlement process works, and just how far you will go secure compensation for your injuries.
In some rare cases, the claims adjuster will make a fair initial settlement offer. But typically, the next step in the negotiation process is to reject the claims adjuster’s initial offer and make a counteroffer.
5. You reject the claims adjuster’s initial offer and make a counteroffer
If the claims adjuster did not make a fair initial offer, you should reject the offer and make a counteroffer. You do this by writing a letter to the claims adjuster stating that you cannot accept his or her offer. Tell him or her why you do not agree with the initial offer. Reiterate how badly you were injured, and remind the claims adjuster that your medical treatment was absolutely necessary.
In making a counteroffer, you should reduce your initial settlement demand, but not by too much. This will show that you are willing to compromise, moving the settlement negotiations ahead. To learn more about this step in the negotiation process, read how to reject an offer and make a counteroffer
6. You and the claims adjuster continue to negotiate
Once you have made a counteroffer, negotiations will resume. The claims adjuster may not respond to your counteroffer right away. You must be patient and wait until the claims adjuster makes another offer. If you call the claims adjuster before he or she makes another offer, you will ultimately harm your chances at receiving a fair settlement.
The negotiation process might involve several more offers and counteroffers between you and the claims adjuster. You must continue to defend your position, pointing at every opportunity to the reliable evidence of your injuries and other losses that you included in your demand letter. Hopefully, you and the claims adjuster will arrive at a settlement figure that fairly reflects the severity of your injuries.
7. You accept or reject the final settlement offer
If you and the claims adjuster have not yet reached a settlement agreement, the claims adjuster may make a final settlement offer. At this point, you must decide whether the settlement offer is acceptable. If you believe that the claims adjuster’s final settlement offer is acceptable, there are certain steps you must take in order to accept the offer. To learn more about how to accept a settlement offer, read accepting a settlement offer
If the claims adjuster’s final settlement offer does not fully account for your injuries and other losses, you may need to consider filing a personal injury lawsuit. Because filing a personal injury lawsuit requires special skill and training, as well as a thorough knowledge of the law and legal system, you should not do so without the assistance of a qualified personal injury lawyer.
Settlement Negotiation Tips
In order to negotiate the best possible settlement, you must:
- BE PREPARED. You should be as prepared for the personal injury claim process as possible. Familiarize yourself with the steps involved in negotiating a settlement, and gather as much credible evidence of your injuries and other losses as possible. Being prepared will help you remain confident, calm, and collected throughout the settlement negotiation process.
- BE PATIENT. Do not jump at the first settlement offer that comes your way. You must stay patient throughout the entire settlement negotiation process. Impatient personal injury claimants often settle their claims for much less than they are actually worth. Securing the maximum possible settlement is worth the wait.
- BE PERSISTENT. Do not allow settlement negotiations to come to a standstill. You must be persistent in moving your claim forward. While you should never rush the settlement process, be sure to respond to requests from the claims adjuster as quickly as possible. Be diligent about following up with the claims adjuster if necessary.
Disclaimer: Information provided on this site is NOT formal legal advice. It is generic legal information. Under no circumstances should the information on this site be relied upon when deciding the proper course of a legal action. Always get a formal case evaluation from a licensed attorney if you think you might have a personal injury lawsuit.