Getting a personal injury settlement offer is one of the most important decisions an accident victim will ever make. Get it wrong and you could leave thousands of dollars on the table.
Insurance companies know exactly what they’re doing.
They have entire teams of trained adjusters ready to minimise payouts. And most people have never dealt with a settlement offer before in their lives.
The good news? With a little practice, just about anyone can learn how to evaluate a settlement offer properly.
In this guide, we’re going to show you the exact steps to take in order to do just that. We’ll cover:
- Why Settlement Offers Matter So Much
- Understanding What Makes Up a Fair Offer
- The Key Factors That Determine Settlement Value
- How To Know If Your Offer Is Too Low
- What To Do Next
Why Settlement Offers Matter So Much
Personal injury case evaluation starts with one simple truth…
Most cases never see a courtroom.
In fact, according to The Law Dictionary, about 95% of personal injury lawsuits settle before trial. That means the settlement offer you receive is likely the only offer you’ll ever see.
Getting this decision right matters.
The question is, how do you know if an offer is fair? Many victims turn to online settlement calculators in order to get a ballpark figure for their personal injury case evaluation. These tools can help you arrive at a fair settlement number for your case.
But here’s the thing…
A calculator is just the beginning. Real settlement evaluation takes a deeper dive into the specifics of your case.
Understanding What Makes Up a Fair Offer
Settlement offers aren’t just random numbers that insurance companies pull out of thin air. There are categories of damages that these numbers are calculated from. If you’re going to do an effective evaluation of personal injury cases, you need to know these categories.
Economic Damages
Economic damages are the easy ones to calculate. They’re usually pretty straightforward and are often backed by actual documentation. Medical expenses, lost wages, property damage, and rehabilitation costs are the primary forms of economic damages you’ll encounter.
Non-Economic Damages
These are a little more complicated. Non-economic damages include things like pain and suffering, emotional distress, loss of enjoyment of life, and even loss of companionship in some cases.
Insurance adjusters have several different formulas they use to calculate these damages. Some of them use multipliers on medical expenses (typically anywhere from 1.5x to 5x) while others use a per diem (“per day”) approach.
The key takeaway here? You want to make sure that both economic and non-economic damages are adequately represented in any settlement offer you receive.
The Key Factors That Determine Settlement Value
Not every personal injury case is created equal. Several factors go into what a fair settlement looks like for your specific situation.
Severity of Injuries
As you might have guessed, this is the biggest factor. A soft tissue injury is going to have a lot less settlement value than a permanent disability or traumatic brain injury. The more severe the injury, the higher the potential settlement value.
Medical Documentation
Medical records are critical. Every doctor’s visit, every prescription, and every therapy session should be documented. Missing time in medical treatment can severely damage a claim’s value.
Liability Clarity
Was fault clearly established? Cases in which the other party is clearly at fault tend to settle for higher amounts. Those in which liability is up for debate or dispute usually settle for less.
Insurance Policy Limits
This is a little-known secret…
The at-fault party’s insurance policy will have limits. Even if a case is worth $500,000, the policy’s limits may only allow for $100,000 in coverage. You can only get out of that insurance company what’s actually written in the policy.
Pre-Existing Conditions
Insurance companies will always try to blame injuries on pre-existing conditions. Be ready to document how the accident in question made those pre-existing conditions worse.
How To Know If Your Offer Is Too Low
Recognising when an offer is a lowball is essential to proper settlement evaluation. Here are some telltale signs that you should walk away from a settlement offer.
The Offer Comes Too Quickly
Insurance companies that make offers within days or even weeks of an accident are almost always lowballing. They want to make the offer before you and your doctor truly understand the full extent of your injuries.
It Doesn’t Cover All Medical Expenses
Medical bills, add them up. If the offer doesn’t fully cover your current and estimated future medical costs, that’s a dead giveaway that it’s too low.
There’s No Compensation for Pain and Suffering
A “fair” offer accounts for non-economic damages as well as out-of-pocket expenses. If there’s no compensation for “pain and suffering,” something isn’t right.
They’re Hurting You To Decide Quickly
Pressure tactics are a huge red flag. A fair offer doesn’t come with artificially-imposed deadlines to make you hurry up and decide.
Studies have shown that victims that don’t settle initial offers end up receiving settlements that are about $30,700 higher than those who do. That’s serious money to leave on the table.
Negotiating a Better Settlement
Don’t take the first offer, even if it’s fair. The vast majority of initial settlement offers have at least some wiggle room when it comes to negotiation. So here’s how to do that.
Document Everything
Have all of your medical records, bills, and proof of lost wages handy. The more documentation you have, the better.
Write a Demand Letter
A demand letter is a formal document that outlines your case and states what you believe fair compensation should look like. Be sure to reference specific damages, and back up your numbers with calculations.
Counter with Facts
When turning down an offer, be sure to explain exactly why it’s inadequate. Reference specific expenses that weren’t properly valued and justify those numbers.
Know When to Walk Away
Sometimes the other side just won’t budge. You need to know when it’s time to escalate things by filing formal legal action.
What To Do Next
Evaluating personal injury settlement offers doesn’t have to be overwhelming or confusing. Just take it one step at a time, and don’t forget these pointers.
Start by gathering all the documentation you have related to your injuries. Everything from medical records to bills to proof of lost income should be organised and ready to hand over.
Next, you’ll want to do the actual calculations and arrive at a total damages figure. Make sure that both economic and non-economic losses are properly represented.
Do your research on similar cases. What have other, comparable claims settled for? This can help put things in perspective.
You should also consider consulting with a professional. Personal injury lawyers generally work on contingency, so you have nothing to lose by at least calling around for a free consultation.
Don’t rush it. You generally have time to make this decision, so take it. Use it wisely.
Wrapping It Up
When it comes to settlement offer evaluation, it really comes down to preparation and patience.
Knowing what to look for in a fair offer, understanding the difference between legitimate and lowball numbers, and knowing how to negotiate effectively can really make a difference in the amount of compensation you receive.
Remember these key points:
- Most cases settle before trial
- Settlement offers include both economic and non-economic damages
- First offers are almost always negotiable
- Thorough documentation strengthens your position
- Taking time to evaluate properly pays off
The settlement offer you accept will be final. You can’t go back and renegotiate it after you sign. Make sure you take the time to evaluate it properly, so you know it truly represents the value of your claim.