Car Accident Settlements - The Process of Calculating Insurance Settlements
Start with this introduction to the settlement process and get a sense of what's in store in your case.
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If you've been in a car accident, in order to make a successful claim and get the right settlement, you must understand two things:
- how the settlement process works, and
- the settlement value of your car accident claim.
Actually, there are two kinds of car accident settlements and they are handled differently (and usually separately). There are settlements for the injuries you received in your car accident, and settlements for damage done to your car. This discussion is about your claim for compensation for injuries caused by the car accident. These are often called "Personal Injury claims" or "P.I. claims." Some insurance companies call them "Bodily Injury" or "B.I." claims. To learn more about how claims for vehicle damage are handled, see Vehicle Damage After a Car Accident.
A Preliminary Word of Caution for Drivers in No-Fault Accident States. 12 states have a no-fault system that applies to car accident injury settlements. In routine cases in those states, an injured driver is paid by his or her own insurance company -- for things like medical bills and lost income -- but cannot be compensated for pain and suffering or make a claim against the driver who caused the accident. However, even in those states, an injured person can make a claim for compensation against the driver who caused the accident under certain circumstances, such as where the injuries are "serious" or the out-of-pocket expenses are above a certain threshold amount. So, even if you are in a no-fault state, read on. You may end making a claim against the driver who caused your accident. If you are not sure about your case, then you should talk to an attorney to get legal advice about your options.
Learn more about How No-Fault Car Insurance Works.
Car Crash Settlement Process
The car accident settlement process begins when your accident happens. It ends, if all goes well, when you receive a check compensating you for your injuries and other losses. Yes, the car accident settlements process begins at the scene of your accident where you start to gather information (let's call it what it is, "evidence") that will be considered in settling your claim.
From the time your accident occurs, until you submit your claim, you need to collect and preserve evidence that documents the cause of your accident and answers the question: How has this car accident affected my life? An evidence checklist you gather should include:
- The facts of how the car accident happened, with supporting documentation such as the police report, witness statements and photos. (Use this accident investigation form to record information at the scene of your accident. Then, keep a diary of important accident-related information, using this diary form.)
- Medical records that show what injuries you received, how they were treated and how well you recovered.
- Medical bills that you incurred to treat your car accident injuries.
- A statement verifying any loss of income that resulted from your car accident injuries.
- Documentation of any other financial losses that you had as a result of your car accident.
- Evidence of your pain and suffering.
When you completely recover from your injuries -- or, if you won't completely recover, after you recover as much as you are going to -- you submit this information to the insurance company in a demand letter. After the insurance company responds to this demand, staking out its initial position, there is normally a give-and-take, back-and-forth negotiation with an insurance adjuster. With preparation, patience and good luck, this process will lead to a car accident settlement. The final paperwork involves trading a "release" for a check. That is, the insurance company pays you money to compensate you for your injuries and damages and, in return, you give a release of your right to make any further injury claims as a result of your accident. When this is done, your car accident settlement is complete.
Settlement Value of Your Car Accident Claim
There are three main ways to estimate the settlement value of your injury claim:
- the Colossus software program
- the "multiple of specials" method
- the "per diem" method
Colossus. Most of the large insurance companies use a software program called Colossus , or something similar, to calculate car accident settlements values in small to medium sized cases. Different insurance companies use this software differently. Some rely on it heavily, especially when the adjuster is inexperienced. Others use it only as a guide or a tool. You can't use Colossus because it isn't available to you. You wouldn't want to use it even if you could. Colossus doesn't consider many of the key facts of the case and doesn't know -- or care about -- what you went through.
Multiple of Specials. To determine what is a fair settlement amount for your injuries, in a typical case you add together the compensation for these 3 things:
- medical bills
- lost income, and
- pain and suffering
Although lawyers and insurance adjusters usually deny using this system, in a routine car accident case that does not involve serious or permanent injuries, many of them calculate settlement value by multiplying the medical bills and lost income -- which the industry calls "special damages" or "specials" -- by somewhere between 1 1/2 and 4, depending on the circumstances of the case.
For example, if you received a neck injury in your car accident, incurred medical bills of $2,500 and missed a week of work which cost you $1,000, your "specials" are $3,500. Depending on the other facts in the case, the settlement value, under the multiple of specials system, is between $5,250 (1 1/2 times specials) and $14,000 (4 times specials).
Per Diem. Another way to determine settlement value is to calculate your pain and suffering by attributing a "per diem" (per day)(or per week, month, etc.) value to it and add that amount to your "specials."
An insurance company may not agree with this, but you might value each month from the time of your injury until you completed treatment at $3,000 and each month thereafter that you suffered from symptoms at $1,000 per month.
For example, let's continue to assume that you had medical out-of-pocket expenses of $2,500 and lost income of $1,000, or total specials of $3,500. Assume further that you were treated for your injuries for 3 months and that, even after you finished treatment, you continued to have pain and stiffness in your neck for another 2 months. After that, you were fine.
Under the suggested values discussed above, the total pain and suffering value under the per diem system is $11,000, and, when the out-of-pocket expenses are added, the total settlement value is about $14,500. Of course, as you have probably already figured out, these methods of determining settlement value do not apply to no-fault systems which do not compensate for pain and suffering. They only compensate for out-of-pocket expenses.