After filing an insurance claim for damages, such as those resulting from a car accident, storm damage, or personal injury, you may receive a settlement offer from the insurance company. The initial offer can seem tempting, especially when you’re facing mounting expenses. However, accepting the first settlement without thorough consideration can lead to financial shortfalls and regrets. Here, we’ll explore why it’s usually not in your best interest to accept the insurance company’s first offer, what factors to consider, and how to negotiate effectively.
Why You Should Be Cautious of the First Offer
1. Insurance Companies Aim to Minimize Payouts
Insurance companies are for-profit entities, and their primary goal is to minimize their costs. Offering a quick, low settlement allows them to close claims rapidly and reduce their financial liability. The first offer you receive is often not a true reflection of the compensation you may be entitled to; it’s typically a starting point for negotiations. They may hope that you’ll accept the initial offer without questioning whether it adequately covers your losses.
2. Your Full Expenses May Not Be Clear Yet
After a significant event like a car accident, storm damage, or a personal injury, the full extent of your losses may not be immediately apparent. For example:
- Medical Expenses: Injuries may require ongoing treatment or rehabilitation, resulting in future medical expenses. Initial settlement offers may only cover current medical bills, ignoring long-term care costs.
- Property Repairs: Storm or accident damage might involve hidden issues that become apparent only after a thorough inspection. Initial repair estimates might not cover all the necessary work.
- Lost Income: If you’re unable to work due to injury, the financial impact could extend well into the future, far beyond the initial settlement amount.
By accepting the first offer, you may miss out on compensation for these unforeseen costs.
3. The Offer May Not Account for Non-Economic Damages
In cases involving personal injury, insurance companies might overlook non-economic damages, such as pain and suffering, emotional distress, and loss of quality of life. These damages can significantly impact your well-being and should be factored into any settlement you accept. First offers often focus solely on economic losses (medical bills, repairs) and do not provide fair compensation for the emotional or psychological impact of the incident.
Steps to Take Before Accepting a Settlement Offer
1. Review Your Policy and Assess Your Claim
Before you even consider the insurance company’s offer, review your policy in detail. Understand what types of damages are covered and the maximum amounts you are entitled to claim. This knowledge will give you a better idea of whether the settlement amount is fair or falls short.
Assess the full scope of your losses, including all current and future expenses. For property damage claims, get multiple estimates from reputable contractors to understand the true cost of repairs. In the case of personal injuries, consult with your healthcare providers to get a prognosis of long-term medical needs.
2. Gather and Document Evidence
To strengthen your position, compile all relevant documentation, including:
- Medical records and bills for injury-related claims.
- Repair estimates and invoices for property damage.
- Lost income statements, including letters from your employer confirming missed work days and wage loss due to injury.
- Photographs of the damages, injuries, and accident scene.
A comprehensive file of evidence will help you present a solid case when negotiating with the insurance company.
3. Consult with an Attorney
An experienced insurance or personal injury attorney can evaluate the settlement offer based on the specifics of your case. They can advise you on whether the initial offer is fair or whether it falls short of your actual losses. An attorney will also be familiar with state laws, such as statutes of limitations and coverage requirements, which may impact your claim.
In many cases, having legal representation can prompt the insurance company to take your claim more seriously and potentially offer a better settlement.
4. Get a Second Opinion
In the case of property damage, consider hiring a public adjuster or an independent contractor to assess the damage and provide a more accurate estimate of repair costs. Public adjusters work on your behalf, not the insurance company’s, and can offer an objective evaluation that might reveal a higher compensation amount than initially offered.
How to Negotiate a Fair Settlement
1. Provide Evidence to Support Your Counteroffer
When you decide to counter the initial settlement offer, back up your request with solid evidence. Submit copies of medical bills, repair estimates, photographs, and any other documentation that supports your claim for a higher amount. Be specific about what costs you are seeking to recover and explain why the initial offer does not suffice.
2. Be Patient and Persistent
Insurance companies may try to pressure you into accepting the first offer by emphasizing that it is “the best they can do” or by suggesting that the claim process could take a long time if you choose to negotiate. It’s important to be patient and not let these tactics rush your decision. Negotiating can take time, but securing a fair settlement that fully addresses your losses is worth the effort.
3. Don’t Sign Anything Until You’re Sure
Once you accept a settlement offer and sign a release form, you typically forfeit the right to pursue any additional compensation in the future. This release means that if unexpected expenses arise, such as new medical bills or additional repair costs, you will not be able to seek further funds from the insurance company. Only sign the agreement once you are confident that the offer adequately covers all your losses, both present and future.
4. Know When to Escalate
If negotiations stall or the insurance company refuses to offer a fair settlement, it might be time to escalate the matter by involving an attorney or considering legal action. In New Mexico, insurance companies are legally required to handle claims promptly, thoroughly, and fairly. Under the New Mexico Unfair Insurance Claims Practices Act, if an insurance company delays or denies a claim without proper reason, policyholders have the right to pursue legal action for damages. Knowing these rights can be crucial when deciding whether to accept an insurer’s initial offer. A lawsuit can prompt the insurance company to reevaluate its offer and take your claim more seriously.
Protecting Your Interests
While it may be tempting to accept the insurance company’s first settlement offer, especially if you’re facing immediate financial pressure, it is often not in your best interest. The first offer is usually a lowball attempt to settle the claim quickly and minimize the insurer’s payout. By fully assessing your losses, gathering documentation, and negotiating or seeking professional legal advice, you increase the likelihood of securing a fair settlement that meets your needs.
At VandenBout Law, our experienced attorneys are here to help you navigate the insurance claims process and ensure you receive the compensation you deserve. If you’ve received a settlement offer in New Mexico or Colorado and are unsure whether to accept it, contact us for a free consultation. Let us help you protect your rights and secure the best possible outcome.
