How Do Insurance Companies Determine Personal Injury Settlements?

In a personal injury case, the negligent party’s insurance company will ultimately be responsible for your medical bills, the cost of rehab, lost wages, emotional distress, and pain and suffering. If the negligence that caused the accident was particularly egregious, such as driving under the influence of alcohol or drugs, punitive damages – which are set in place in an attempt to prevent the person responsible from ever committing such an act again – may also be assessed. In order to determine a settlement, insurance companies calculate payments using what is called a “damages formula,” determined by an insurance adjuster.

Damages Formula, Decoded
First, the insurance adjuster will attempt to see how little money you would take in order to settle your case without suing their client, the party at fault. This is the point where you should contact a personal injury lawyer, like a personal injury lawyer in West Palm Beach, FL, in order to ensure that your medical expenses are covered in full. Accepting the insurance company’s initial offer could ultimately cost you dearly, leaving you with medical expenses that crush your monthly budget after an incident that was no fault of your own.

With a personal injury attorney on your side, negotiations can begin. At this point, insurance companies and their team of lawyers will calculate your total medical bills and use that total as a way to estimate what they think your compensation should be for pain and suffering. The standard formula is usually somewhere between one and a half to five times your medical costs, depending on the severity of the injuries, along with lost income.

That figure is then added to economic losses including medical bills, property damage, loss of income, and other expenses. The same formula is used for all types of personal injury cases including car accidents, dog bites that happen at someone’s home, or injuries that occur at a place of business.

How Low Will They Go?
For insurance companies, settlement offers are similar to a game of limbo, and if they can get you to accept the first – and lowest – offer they make, they win the game. Unfortunately, that usually means that you will lose substantially, since unforeseen medical bills can easily crush you financially, especially if you are one of the unlucky Americans without health insurance.

It’s important to understand that the initial settlement offer is often much lower than what would be considered reasonable. Your attorney will continue to negotiate until he or she is certain that the amount being offered will cover medical bills, legal fees, pain and suffering, property damage, and other expenses incurred as a result of the incident. You should not be stuck with medical bills or other expenses after an accident that was the result of someone else’s negligence, and the right attorney will ensure that the settlement you receive is a fair one that covers all your expenses, as well as pain and suffering.

Thanks to The Law Office of Eric H. Luckman, P.A. for their insight into how insurance companies determine personal injury settlements.