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Why are insurance companies often eager to settle claims?

On Behalf of | Jan 21, 2025 | Firm News |

People who get hurt in car crashes often expect a lengthy claims process. They know they need to submit information to the insurance company to receive payment. They may send in medical invoices, vehicle repair estimates and other official documentation of collision-related costs.

In many cases, insurance companies respond to sizable claims by proposing a lump-sum settlement. Injured individuals sometimes accept settlements without revealing them, only to later realize they have done themselves a real disservice.

Insurance companies are often eager to settle claims because doing so absolves them of liability.

How insurance settlements work

In an insurance settlement scenario, the professional receiving claims documentation proposes a lump-sum payment. The amount of the settlement is often far lower than the policy limits. In other words, the settlement is for less than the maximum amount the insurance company could cover.

In return for the lump-sum settlement payment, the claimant gives up the right to seek additional compensation in the future. They may end up settling for far less than their total losses. By the time a claimant realizes they have expenses their settlement doesn’t’ cover, it may be too late.

Insurance companies prefer settlements because they can limit collision costs and end company liability. Settlements often take advantage of people’s economic uncertainty and their eagerness to be done with insurance company red tape.

Carefully evaluating a car crash settlement offer can help claimants determine if the offer is reasonable or not. People may need to be ready to reject a settlement or enter into negotiations to obtain the compensation they deserve after a motor vehicle collision.