Insurance settlement offer too low? How to check it
Read an insurance settlement offer line by line, check it against your own records, and learn what the insurance company has to explain.
Kyle MooreCo-founder · Georgia trial attorney
- 17 sources
- 8 min read
The short answer
Read the offer one line at a time. Compare each line with your own bills, pay records and repair estimates 1115. Ask the insurance company, in writing, how it reached its number. The NAIC model law treats failing to explain a compromise offer promptly as unfair 5. A counteroffer is your written reply, with reasons and a number 11. Don’t sign a release until you are ready for it to be final 12.
Key points
- An offer is built from parts: your share of fault, medical bills, lost wages, car damage and the other driver’s coverage. Check each part against your records 111.
- Ask how the insurance company got its number. The NAIC model treats failing to explain a compromise offer promptly as unfair, and states adopt their own versions 5.
- A release generally ends your right to more money. Hold the check until you are ready to settle 124.
Why do insurance companies make lowball offers?
An offer can fall short of the compensation you expected for plain reasons. An adjuster’s job is to limit the company’s costs 15.
The insurance company may lack information about your injuries, bills or damage. It may think you share the blame. Or it may open low as a negotiating move 15.
Fault matters because many states cut an offer by your share. In Utah’s example, a driver 20% at fault might be offered 80% of the damages 1.
Your share of the blame comes straight off the offer.
At 20% of the blame, the offer is 80% of the damages.
Adjusters also push back on treatment. Chiropractic care, acupuncture and massage may need proof that they were medically necessary 11.
Sometimes the cause is the other driver’s coverage. A low policy limit caps what the insurer can pay, and your own underinsured motorist coverage may matter then 111.
A low offer “doesn’t mean you need to take it” 15.
What does each line of an offer letter tell you?
No official source publishes one national offer letter. So this example is built only from what insurance departments and Nolo say offers contain 16711.
It is not a real letter, and your state’s version may differ.
A. The basics
Confirm the claim number, the date and the names are right.
Match it with: Your claim papersG. Rental
Utah says rental is owed only if the insurer accepts liability, and many insurers pay a flat daily amount 1.
Match it with: Your rental receiptsH. The limit
The at-fault driver’s coverage caps the payment. Utah’s minimums are $30,000 per person and $65,000 for two or more people, for injuries 1.
Match it with: Ask for the limit in writingI. The release
This line decides everything else. See below.
Match it with: Hold the check until you are ready
How do you check the offer against your own records?
Put your papers next to the letter and match them line by line. Nolo’s list of records is a good start 11:
- Medical records and bills, plus records showing medical necessity for less usual care.
- An employer letter on lost wages, including paid time off you used.
- Estimates of future medical care, kept apart from past bills.
- Therapy and medical records that show pain and limits.
- Written statements from family, friends or coworkers.
For the car, bring your repair estimate and photos. Texas’s public insurance counsel also lists the police report and repair shop contacts 4.
Where the letter counts less than your records, ask why.
Type both numbers.
Type both numbers.
Type both numbers.
Then look for gaps: a bill that isn’t counted, a day of lost work that is missing, or a deduction with no dollar amount 111.
If the gap is missing paperwork, send it. FindLaw suggests police reports, more medical records, treatment bills and repair estimates 15.
Before you accept, wait until you know the full extent of your injuries. Settling generally waives future claims 12.
Does the insurance company have to explain its offer?
The answer depends on your state, because the main rule is a model. The NAIC (the group of state insurance regulators) publishes a model law.
It lists as an unfair practice: failing, when it denies a claim or makes a , to “promptly provide a reasonable and accurate explanation of the basis” 5.
It also lists not trying in good faith to settle fairly once fault is reasonably clear 5. Each state decides whether to adopt it, and many change it 5.
Please explain how you reached each amount, and send the records you relied on.
- A model, not a law
NAIC model law
“promptly provide a reasonable and accurate explanation of the basis”
- Applies to a denial or a compromise offer
- Each state decides whether to adopt it, and many change it
- A state rule
California
An offer may not be “unreasonably low”
- Its rule does not require a written explanation of an offer
- A total loss needs the comparable car “fully itemized and explained in writing”
- A state rule
Utah
Itemized written explanations
- Required for car-repair deductions
- Betterment amounts and aftermarket parts, in writing
States differ. California bans an offer that is “unreasonably low,” but its rule does not require a written explanation of an offer 7.
Utah requires itemized written explanations for car-repair deductions 1.
For a total loss, California requires the cost of the comparable car to be “fully itemized and explained in writing” with the offer. The model regulation says the basis for a settlement must be fully explained to a first-party claimant 67.
So ask, and put it in writing: “Please explain how you reached each amount, and send the records you relied on.” FindLaw also advises asking for the insurer’s reasoning 15.
What happens if you reject the offer?
You can say no. Rather than just refusing, FindLaw suggests answering with an amount you consider fair compensation 15.
The adjuster may accept it or answer with another counteroffer. FindLaw says this back-and-forth can repeat many times before both sides agree 15.
A is your written reply to the insurance company’s offer. Nolo suggests a typed, factual letter 11.
- 1Thank the adjuster.
Keep the tone calm.
- 2Say you reject the offer.
- 3Sum up their reasons.
Use their words.
- 4Answer each reason.
Point by point, with your records.
- 5State your number and ask for a reply
within a reasonable time, such as two weeks 11.
If an offer looks illegitimate, Nolo suggests a short letter saying so and asking for a serious proposal, without lowering your demand 11.
Many claims start earlier with a , your first written ask. Nolo says it describes the facts, injuries, treatment and the other party’s responsibility. It itemizes damages and names a sum 11.
We couldn’t confirm a general rule on whether a rejected offer stays open. Ask the adjuster in writing before you reject.
What does signing a release mean?
To settle an injury claim, the insurer will want a 1.
Signing means the offered amount is the only money you will ever receive from that driver and insurer 14.
Utah says to be sure you are ready to accept a final amount before you cash the check or sign 1. Texas’s counsel says to read everything you are given, including checks 4.
The NAIC model also says an insurer shouldn’t tell a third-party claimant that rights may be lost if a release isn’t signed by a date, unless it is warning about a deadline to sue 6. That is a model, and states differ.
Also check who may want repayment. A health plan, a hospital or a government program can have a claim on your settlement, and holders are paid out of it 13.
The only money you will ever receive from that driver and insurer.
- A health planmay claim a share
- A hospitalmay claim a share
- A government programmay claim a share
What if the insurance company won’t raise its offer?
You have options, and none is a guarantee.
You can file a complaint with your state insurance department. The NAIC says to try the insurer first, then find your state’s department. Gather your policy number, documents, bills and a dated log of every contact 8.
The department sends the complaint to the insurer, which must respond 8. The NAIC’s steps are written for your own insurer. New Jersey’s ombudsman takes written complaints about third-party claims, so check what your state takes 38.
File a complaint with your state insurance department
- Try the insurer first, then find your state’s department 8
- Gather your policy number, documents, bills and a dated log of every contact 8
- The department sends it to the insurer, which must respond 8
- New Jersey’s ombudsman takes written complaints about third-party claims; check what your state takes 38
None of these is a guarantee.
Other options named by Utah and Illinois: a claim under your own policy, if you have the coverage; or small claims court if the amount fits the limit (Utah’s is $20,000) 12. There is no appraisal process for a disputed offer 1.
Keep the deadline to sue in mind. It is usually 1 to 6 years, most often 2 or 3, and injury and car damage can differ 14. Missing it may jeopardize your right to any settlement 12.
When should you talk to a lawyer?
Talk to one if your injuries are serious or may get worse, or you can’t tell what the claim is worth 12. If yours is small and clear, see can you settle a car accident claim without a lawyer?
Nolo also names a complex claim, low policy limits, or needing advice on whether to settle, especially if you need money quickly 11.
FindLaw suggests having a lawyer review your written reply before you send it, so your words don’t hurt your claim. A lawyer can also check your deadline to sue 15.
Free and low-cost help exists. A lawyer referral service, run through your state or local bar association, can point you to a lawyer. Some lawyers offer free services or reduced fees. Ask about up-front fees 9. Here’s what to bring to the first consultation.
- 129legal aid groups funded by LSC 10
Legal aid
Free civil legal help for people with low incomes. Search by address for the groups the Legal Services Corporation funds 10. Ask whether the office takes injury cases.
Lawyer referral service
Run through your state or local bar association, it can point you to a lawyer. Some lawyers offer free services or reduced fees. Ask about up-front fees 9.
LawHelp.org
Finds legal aid by state 16. Ask whether the office takes injury cases.
Legal aid is free civil legal help for people with low incomes. The Legal Services Corporation lets you search by address for the groups it funds, 129 in all 10. LawHelp.org finds legal aid by state 16. Ask whether the office takes injury cases.
What can you do this week?
Want to talk it through?
Talk it through with Scribe
Tell Scribe what the insurer offered or said. It helps you understand your options in plain English and writes a summary you can share with a lawyer. Talking with Scribe is free.
Talk to Scribe for freeScribe is an AI assistant, not a lawyer. AI can make mistakes. Check important details, and talk to a lawyer before you act.
Common questions
Can I take the check and keep negotiating?
Utah says to be sure you are ready to accept a final amount before you cash the check or sign the release 1. Ask the adjuster in writing what accepting the payment would mean.
Does a low offer mean the insurer broke a rule?
Not by itself. The NAIC model asks for good faith and an explanation of a compromise offer, and California bans offers that are “unreasonably low” 57. States differ, and the NAIC model act itself does not create a right to sue 5. A complaint to your state department is the usual remedy 8.
Do you have to pay taxes on an insurance settlement?
For a physical injury, usually not. The IRS says a settlement for personal physical injuries isn’t taxable, except the part that repays medical expenses you deducted in an earlier year 17. Car damage paid below your in the car isn’t taxed either 17. Interest and punitive damages are taxable 17. Ask a tax professional about your own case.
Sources
- Third-party auto claim · Utah Insurance Department
- Filing a claim with another driver’s insurer · Illinois Department of Insurance
- What you should know (third-party claims) · New Jersey Department of Banking and Insurance, Office of the Insurance Ombudsman
- Third-party claims · Texas Office of Public Insurance Counsel
- Unfair Claims Settlement Practices Act (#900) · National Association of Insurance Commissioners
- Unfair Property/Casualty Claims Settlement Practices Model Regulation (#902) · National Association of Insurance Commissioners
- 10 CCR 2695.7 and 2695.8 · California Code of Regulations (Legal Information Institute, Cornell Law School)
- How to file a complaint · National Association of Insurance Commissioners
- How can I find a lawyer? · Consumer Financial Protection Bureau
- Get legal help · Legal Services Corporation
- How to respond to a lowball personal injury settlement offer · Nolo (hosted on AllLaw)
- Hire a lawyer or handle your own claim · Nolo (hosted on AllLaw)
- Medical liens · Nolo (hosted on AllLaw)
- Deadline to file a personal injury lawsuit · Nolo (hosted on AllLaw)
- When the car insurance settlement offer is too low · FindLaw
- LawHelp.org · Pro Bono Net
- Publication 4345, Settlements — Taxability · Internal Revenue Service
A Marine Corps veteran and Georgia trial attorney since 2013, Kyle brings his courtroom experience to Scribe’s founding team. Licensed in Georgia.
Scribe is an AI assistant, not a lawyer. A conversation does not create an attorney-client relationship. This article is general information, not legal advice.
compromise offer
An offer to settle for less than the full claim, which the insurer is expected to explain 5.
demand letter
Your written ask: the facts, injuries, treatment, responsibility, itemized damages and a sum 11.
counteroffer
Your written reply to the insurer’s offer, with reasons and a number 11.
release
A paper you sign before a final settlement. It generally ends your right to further payment 12.
betterment
A deduction when a repair leaves your car better than it was before the crash. Utah requires it to be itemized 1.
lien
A claim on your settlement by someone who is owed money, such as a hospital. It is paid out of the settlement 13.
adjusted basis
A tax figure for something you own, such as a car. A damage payment above it counts as income 17.
no-fault
A state system where, for small injuries, your own coverage may be all you can claim. Pain and suffering claims may need an injury threshold 12.
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