Don't Settle for the First Offer from an Insurance Company

What You Should Know About an Insurance Company’s First Settlement Offer

Dealing with insurance claims can be stressful and overwhelming after an accident, property damage, or personal injury. One of the most important things to understand is that the first settlement offer from an insurance company is rarely the best offer you can receive. While it may be tempting to accept this initial offer and resolve the claim quickly, doing so can leave you with far less compensation than you deserve. In this guide, we’ll explain what you need to know about an insurance company’s first settlement offer, why it’s often lower than what you’re entitled to, and how to negotiate a fair settlement.

Read a breakdown of how insurance companies make money.

The First Offer is Often a Lowball Offer

Insurance companies are in the business of protecting their bottom line, and their first settlement offer is typically a starting point for negotiations. The initial offer is often lower than you are entitled to, especially in significant damage or serious injury.

Why It’s Often Low:

Minimizing Payouts: Insurance companies want to settle claims quickly and for as little as possible. By offering a low initial amount, they hope that you will accept it without question.
Hoping for Quick Resolution: Insurance companies know that many claimants are eager to resolve their claims quickly, especially if they face financial pressures. They may count on you accepting the offer out of urgency.

Before accepting the first settlement, it’s important to evaluate the full extent of your losses, including future expenses such as ongoing medical care, property repairs, and lost income.

The First Offer May Not Cover All of Your Losses

Insurance companies may base their initial offer on a narrow view of your damages, leaving out critical costs or downplaying the extent of your losses. This is especially common in personal injury or property damage cases, where the full extent of your damages may not yet be apparent.

Common Costs Not Fully Covered by the First Offer:

Medical Expenses: The first offer may only cover immediate medical bills, but what about ongoing treatment, physical therapy, or future surgeries? Ensure all your medical needs are accounted for before agreeing to a settlement.
Lost Wages: If you’ve had to take time off work due to your injuries, the insurance company should compensate you for lost wages, including potential future earnings, if you cannot return to work.
Property Repairs: For property damage claims, the first offer may only account for superficial repairs without addressing deeper issues, such as water damage, mold, or structural concerns.
Pain and Suffering: An initial settlement offer often does not adequately address the emotional and physical toll of an accident or injury. Compensation for pain and suffering may require negotiation.

You Have the Right to Negotiate

Receiving a low initial settlement offer can be discouraging, but it’s important to remember that you have the right to negotiate. You are not obligated to accept the first offer and can respond with a counteroffer based on your actual damages and the fair value of your claim.

Evaluate Your Damages Thoroughly: Before making a counteroffer, evaluate the full extent of your damages. Consider medical bills, repair estimates, lost wages, and other related expenses. It’s also helpful to consult with a personal injury lawyer to assess the value of your claim accurately.
Provide Evidence: When making a counteroffer, back up your demand with evidence. This can include medical records, bills, repair estimates, proof of lost income, and any other documentation that supports your claim.
Consult with an Attorney: If you’re unsure about negotiating on your own or the insurance company is unwilling to offer a fair settlement, hiring an experienced insurance claim attorney can help level the playing field. Williams Law, P.A. will advocate on your behalf and handle negotiations with the insurance company.

The Offer May Include a Release of Liability

When you accept a settlement offer from an insurance company, you are typically required to sign a release of liability. This means that you can no longer pursue additional compensation for the same claim once you accept the offer, even if you discover new damages or expenses later.

Risks of Signing Too Soon:

Undiscovered Damage: In property damage claims, issues such as water damage, mold, or structural problems may not be immediately apparent. Accepting a settlement too early could leave you responsible for costly repairs.
Ongoing Medical Issues: In personal injury cases, the full impact of your injuries may take time to develop. If you accept the first offer and later discover you need more extensive medical treatment, you won’t be able to seek additional compensation.

It’s crucial to fully understand the long-term implications of your injuries or property damage before agreeing to a settlement. Consulting with an attorney can help you avoid signing away your rights prematurely.

Your Policy May Cover More Than You Think

The initial offer may not include all the benefits you are entitled to under your policy. For instance, homeowners insurance may include temporary living expenses (ALE) coverage if your home is uninhabitable, but this may not be included in the first settlement offer.

Consider These Policy Benefits:

Additional Living Expenses (ALE): If you’re displaced from your home due to property damage, your policy may cover hotel stays, meals, and transportation costs.
Personal Property: Insurers may understate the value of personal property lost or damaged, so it’s important to review your inventory and ensure all items are included.
Full Replacement vs. Actual Cash Value: Some policies cover full replacement costs for damaged property, while others only cover the depreciated value (actual cash value). Make sure your settlement reflects the correct type of coverage.

The Offer May Not Reflect Long-Term Costs

When you accept the first offer, you might not be accounting for future or long-term costs related to the damage. For example, in personal injury cases, accepting a low offer might leave you without compensation for future medical treatments, rehabilitation, or loss of income if your injuries prevent you from working.

In property damage claims, the initial offer may not cover hidden damage that could become more apparent over time. If you accept the first offer and discover additional damage, it may be too late to request more compensation.

Future Costs to Consider:

Ongoing Medical Expenses: In injury claims, you should consider potential future treatments, physical therapy, or surgeries when negotiating your settlement.
Long-Term Property Damage: In-home or auto claims, structural or water damage may worsen over time. Make sure to account for these risks before accepting a settlement.

Additional Tactics Insurance Companies Often Use Tactics to Undermine Your Claim

By recognizing these tactics, you can better prepare to counter them with the help of a knowledgeable insurance lawyer who can advocate for a fair and just settlement.

Pressure Tactics: Low initial offers can create a sense of urgency or pressure, making you feel that accepting the offer is the quickest and easiest resolution. This tactic is designed to make you settle before fully understanding the full value of your claim.
Exploiting Lack of Information: Insurance companies may offer a low initial amount when they know you might not yet have all the necessary information, such as complete medical records or repair estimates. This tactic takes advantage of your incomplete data to offer less.
Creating Doubt: Low initial offers can create doubt about the legitimacy of your claim or make you question whether you deserve more compensation. This psychological tactic can pressure you into accepting a lower amount.
Forcing a Quick Decision: A low offer can push you into making a hasty decision, potentially without proper legal or medical advice. This tactic aims to close the claim quickly and avoid a more thorough review.
Testing Your Resolve: The initial low offer can allow insurers to test your resolve and see how much you’re willing to negotiate. If they see you’re eager to settle, they might stick with their low offer, hoping you’ll accept it.

Insurance Companies Have Resources—So Should You

You might not fully understand your rights and what constitutes a fair settlement without consulting a legal professional. Williams Law, P.A. can help you assess the offer and negotiate a more appropriate amount covering all your damages. If your claim is denied or delayed, our insurance claim lawyers will advocate for you, challenging the insurance company’s decision or unreasonable delay. We can file appeals, gather evidence, and push for a resolution you cannot do otherwise.

Insurance companies have vast resources, including adjusters, legal teams, and claims specialists working to minimize the payout. To level the playing field, you should consider enlisting the help of your experts, such as a Florida insurance claim lawyer who can provide a more accurate assessment of your claim.

Consulting a Florida Insurance Lawyer Can Ensure Fair Compensation

As stated, our Florida insurance claim lawyers will thoroughly evaluate your claim, ensuring that all aspects of your damages and losses are considered. We have the expertise to negotiate on your behalf and can help you understand the implications of any insurance company offer.

It’s important to remember that you are under no obligation to accept the insurance company’s first settlement offer, especially if it doesn’t meet your needs. It’s crucial to evaluate the full extent of your damages, seek professional advice, and be prepared to negotiate for a fair settlement. Call us at 1-800-451-6786 or fill out our online contact form.