Insurance companies in California follow a structured process when determining settlement offers for accident claims. While they claim to be fair, their goal is to pay as little as possible. Understanding how they calculate settlements can help you recognize when an offer is too low.
Factors that affect settlement amounts
Insurance companies start by looking at your medical expenses. They review hospital bills, doctor visits, medication costs, physical therapy, and any other medical treatments. If you need ongoing care, they may estimate future medical costs.
Lost wages are another key factor. If your injury caused you to miss work, they will calculate how much income you lost. If your injuries affect your ability to work in the future, they may consider lost earning potential.
Pain and suffering are more difficult to calculate because they are not based on bills or receipts. Insurance adjusters use different methods, such as the multiplier method, which multiplies medical costs by a number between 1.5 and 5 based on injury severity. They may also use a per diem method, assigning a daily dollar amount to your pain and suffering.
The policy limits of both drivers play a role in the final settlement. If your damages exceed the at-fault driver’s policy limits, the insurance company will not pay beyond that amount. Your own uninsured or underinsured motorist coverage could help, but only if you have that coverage on your policy.
Liability also affects settlement amounts. If the insurance company believes you were partly at fault, they may reduce your settlement using California’s comparative negligence rule. For example, if they decide you were 20% responsible, they will reduce your settlement by 20%.
Tactics insurance companies use to lower payouts
Insurance companies often offer quick, low settlements before you fully understand your injuries. They may also ask for recorded statements and use your words against you. If you delay medical treatment, they could argue your injuries are not serious.
They also use complex formulas to justify lower pain and suffering amounts. Some adjusters pressure claimants by saying the offer is final, even when there is room to negotiate.
Knowing these tactics can help you make informed decisions. If an offer seems too low, you have the right to push for a fairer settlement.