The vast majority of legal disputes are settled out of court. With car accidents, a good attorney will be able to obtain a favorable settlement perhaps even before a formal complaint gets filed. However, sometimes insurers will play the long-game, hoping to offer an acceptable settlement before having to proceed to trial. Either way, here are the top 5 things you should know about car accident settlements.
- Never accept the first offer. This can be excruciating to reject. You probably have bills to pay, car repairs, and the debt collectors are calling. But understand that insurers will always attempt to offer the lowest possible amount – even if you are not at fault. Their job is to settle the claim quickly and inexpensively. Having a personal injury lawyer representing you can help you negotiate the settlement to ensure you get every cent you are owed. With that in mind, try to have patience, because…
- It can take months to get a claim settled. There are no hard and fast rules about how long a claim should take to process, or even how much an insurance company will pay you. If you accept the first low-ball offer, then you could possibly have that money in a matter of weeks. If you want to negotiate, then the insurance company is going to more staunchly defend its resources. The insurer will want to review all medical records, bills, employment records, and even do their own private investigation to verify the veracity of your claims. Gathering this documentation can often take a month or two, depending on how quickly the companies respond to their requests. Of course, the insurer will take a few weeks to evaluate the claim in light of the new evidence – so you are already looking at around 3 months, minimum, for another settlement offer. It may take another few weeks to negotiate them to a higher number, and of course, a few more weeks to complete the administrative details such as mailing the checks, signing off all the documents, and things of that nature. Of course, this is assuming that the claim gets settled before going to court. Once complaints are filed, it could take years.
Litigation can extend the timeline significantly. Documents must be exchanged through a process called discovery. Expert witnesses may need to be hired, and parties might want to initiate depositions. All of this can happen, and the insurer may offer you a great deal at the last minute. It’s a high stakes game of chess, and you should get an experienced and competent car accident attorney on your side to make sure you are successful.
- It’s sometimes paid in installments. If the settlement is very large, then the insurer may offer to pay it out in certain installments over a period of time until the settlement is paid in full. Sometimes, they might offer an annuity. There are benefits and drawbacks to agreeing to an annuity settlement, also called a structured settlement. A structured settlement often provides a steady source of income, and if it is an immediate annuity (not invested) then it is tax-free at both the state and federal levels. These payments are predictable, meaning you can manage your affairs more easily. You will not be tempted to spend everything all at once. Annuities can be ideal for someone who has been severely and permanently injured, who will need medical care for the remainder of their life. These structured settlements are very complicated and require experts who are looking out for your best interest, not the insurance company’s bottom line. Therefore, it is critical to hire an attorney who understands the collateral consequences of both a lump sum payout and a structured settlement, so they can advise you on the option that is best for your situation.
- You could owe taxes on it. Some payments within the settlement may be subject to tax, no matter which option you choose. Damages that are intended to compensate for medical expenses, lost wages and pain and suffering is typically not taxable. The injuries you suffer must be ‘physical’ to be tax-free, so any emotional damages claim that you win will be taxed under the law. Additionally, compensation for lost income is subject to tax, as well as punitive damages.
- Settlements are final. Once you and the insurer have agreed to a number, you cannot come back with cold feet and ask for more. The insurance company will ask you to sign a release form upon agreement, saying that you agree to accept the stated amount. This also means that you cannot sue them for more money after you have reached an agreement. If you are not happy with the number on the release form, then do not sign it. This is why it can be crucial to get an attorney to review any documents and settlement offers. Hopefully they will have had access and time to review all the pertinent documentation, so they can give you educated advice on whether or not to accept. Once the release form is signed, it is forever.
An offer of settlement can be a lifeline for your or your family if you have been injured in an auto accident. You should approach it and protect it as though it is your livelihood – know what your compensation is worth. If you are unsure, then you should always hire a determined and smart car accident lawyer to make the most of your claim.