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​How Do Car Accident Settlements Work?

You have a legal right to financial compensation when someone else was at fault for your car accident injuries. In most cases, your compensation comes when you sign a settlement agreement with the company that insures the responsible driver.

The settlement process involves many details and requirements. Receiving a settlement check is far from automatic, and you must fight to get what you deserve. A tough and determined car accident attorney is a must for you to get the amount of money to which you are legally entitled.

Your Legal Pathways to a Car Accident Settlement

You can get a car accident settlement in one of two ways:

  • You can file a claim directly with the responsible driver’s insurance company
  • You can settle a lawsuit that you file in court against the responsible driver (it will be the insurance company that defends the case in court)

Your Steps to Financial Compensation in a Settlement

In the claims process, there are multiple steps that you need to take to be in a position to get money from the insurance company.

An insurance claim involves:

  • Gathering evidence to show that happened in your car accident
  • Estimating your damages and preparing your claim to file with the insurance company
  • Negotiating the compensation amount with the insurance company
  • Signing the actual settlement agreement and getting your money


An Experienced Attorney Helps You Navigate the Settlement Process

​How Do Car Accident Settlements Work?The claims process is hard work for you as a claimant. You can hire an experienced attorney to represent you in dealing with the insurance company. Contacting a lawyer is the first step in a car accident settlement. Getting from start to finish in the settlement process is often not linear. You often must overcome hurdles in your way before you can get your money.

Never deal with an insurance company on your own because it will cost you money. You may even have your claim denied in its entirety because you will be unable to prove what happened in your car accident. You will do far better when you have a lawyer in your corner.

Once you contact a lawyer, you will have an initial consultation with them. Your lawyer will ask you questions and learn more about your case. They will explain your legal options and how you should proceed.

What Steps to Take if You Were Involved in a Car Accident?

Getting into any accident can be a stressful situation and you need to make sure you are getting what’s owed to you from your claim. Reaching out to an experienced car accident lawyer is a great first step.

The First Key Step Is Proving Liability

Before you can be in a position to negotiate an actual settlement amount, the insurance companies must determine liability for your accident. No matter what happens, never assume that this is an easy step in the process. Never underestimate the ability of an insurance company to try to make your life difficult and save money at your expense.

Your lawyer will need proof of the other driver’s liability in the events that led to the crash. By this point, your lawyer should have reviewed the facts and interviewed people who saw the crash. They will have looked at photos from the scene of the accident and any available video camera evidence.

They may have even consulted with an accident reconstruction expert. It may take time to assemble your case before you can approach the insurance company with a claim.

Preparing to File an Insurance Claim

Your lawyer will also need to review your damages to come up with a number to seek from the insurance company. In any personal injury case, you have the legal obligation to prove your damages before receiving them.

You will file a claim with the other driver’s insurance company at some point. While an insurance company has a legal obligation to act on your claim within a reasonable amount of time, they are getting their ducks in a row, trying to figure out a strategy for dealing with your claim. They know what your claim is worth and want to settle it for less than that amount.

The insurance company will respond to your claim in one of two ways:

  • They can deny it entirely if they think that you do not have evidence that the other driver was negligent or if they think that you are at fault
  • They may accept liability and make you a settlement offer

What Do You Get Paid for in a Car Accident Settlement?

If the latter situation applies, you can be confident that the settlement offer the insurance company makes will not be enough to compensate you for your injuries.

A car accident settlement needs to pay you for:

A car accident settlement comes after much effort. You may need an entire series of negotiations with the insurance company before you can arrive at an agreed-upon amount.

Insurance Companies Will Make the Process Hard

To understand why settlement agreements can be challenging, you should know more about how an insurance company operates. Drivers pay monthly premiums to an insurance company, which then invests the money, usually in stocks or bonds.

The longer this money can stay invested, the more the insurance company may earn. If they have to pay your claim, they will take money out to write you a check. Because this money represents lost profits, it is the last thing the insurance company wants to do. Insurance companies usually have shareholders or owners who have every motivation to make money, often at your expense.

Why Insurance Companies Make Life Difficult for You?

Therefore, the insurance company is looking to do everything possible to get off cheap. They will automatically start a settlement negotiation by going low.

They have two motivations here:

  • They want to wear you down, so you will eventually accept less because you are worried about your finances
  • They want to see what you may accept, especially if they think that you are unaware of the value of your claim

There Are ups and Downs in the Car Accident Settlement Process

The car accident settlement process is a push-and-pull. The insurance company offers low figures, and you counter them, trying to get more money. Eventually, you will reach a number where you agree. The insurance company is not in the business of going to court for every single claim.

If they were, they will consume all their profits having to pay their defense lawyers. They strike a delicate balance between pushing you but not wanting to push you enough that you will sue and take your case to a jury. They know precisely when they need to settle a case and what to do to reach an agreement.

You also must understand the insurance company’s role in a car accident case. Your legal rights do not come from the insurance company. They come from the fact that you suffered an injury from a negligent driver.

At that point, the driver is legally obliged to pay you for the damages they caused. The insurance company steps into the driver’s role because they have a legal obligation to pay damages their policyholder causes up to the policy limit.

The Insurance Company Does Not Have Absolute Power Over You

Therefore, while it seems that the insurance company has power over you, they do not. They can make things more complicated, but the jury is the one who has the final say. Settlement negotiation is just how the case can resolve without you having to sue the driver.

If you can reach a settlement agreement, it will pay you money in exchange for your legal right to financial compensation for your injuries. If you cannot settle, either because the other driver’s story differs, your claim gets denied, or the insurance company will not offer enough money, you can file a lawsuit against the responsible driver.

Some Lawsuits Will Also Result in a Settlement Agreement

You can also reach a settlement agreement after filing a lawsuit. Many people think your case must go to a jury trial once you file a lawsuit against the driver. The truth is that very few cases will ever see the inside of the courtroom. Both you and the insurance company have reasons to settle the case.

From your standpoint, you can risk getting nothing when you go to a jury, and it will take far longer. The insurance company may risk getting hit with a higher verdict than they will pay if they settle the case.

You Must Sign a Release in Exchange for Your Car Accident Settlement

A car accident settlement is a legal agreement between you and the insurance company. Like any contract, each of you is giving the other something. Of course, the insurance company gives you money to pay for your damages. In return, you must give the insurance company a signed release form, which means you give up the right to come back for more money.

The release gives finality to your case. If you settle your case for too little, you are still legally barred from suing again or asking for additional money. The insurance company is keen to get that release agreement in exchange for as little money as possible.

Once you agree on a settlement amount, you must sign an actual settlement agreement. Usually, there is no dispute about the language of the settlement agreement. You will need to decide how you want to take your money. You can get it all at once or opt for a structured settlement that pays you a certain amount at a time. You will talk with your lawyer and possibly a financial adviser about what works best for your situation.

Your Settlement Check Can Be in Your Account in a Couple of Weeks

When the insurance company writes you the settlement check, it does not go directly to you. First, it must go into your lawyer’s escrow account because numerous people may have the right to be paid from the proceeds. Your lawyer is entitled to part of the settlement agreement because they are working for you on a contingency basis.

In addition, your health insurance company and doctors may have a lien on the part of the settlement, which was designated to pay them back for the services they have already provided.

Hire an Experienced Attorney for the Settlement Process

Hire an experienced attorney to represent you throughout the process. While they do not have power over you, the insurance company works with a home-field advantage. They have built an extensive infrastructure where they have actuaries and adjusters whose job is to protect their interests. They skew the process in their own favor to profit at your expense.

Your lawyer will work to protect your legal interests. Not only is it their job to make sure you get money for your case when you deserve it, but they also work to maximize your financial compensation.

Your car accident lawyer will:

  • Investigate the cause of your car accident and work to assemble the necessary proof
  • Explain your legal options and strategize with you to help get you adequate financial compensation
  • Review your case to help you come up with a starting point for negotiations
  • Hold the insurance company accountable when they try to give you a meager settlement offer by saying no and using your leverage to file a potential lawsuit.
  • Counsel you on the legal process and your case at every step of the way

Once you hire a lawyer, they will handle all communications with the insurance company, so you never risk saying the wrong thing and jeopardizing your settlement. They will negotiate and provide additional evidence and information as needed, so you can focus on your physical recovery from your injuries. The right lawyer signals to the insurer that you will not back down.

Lauren Varner, Personal Injury Attorney

Lauren is a Personal Injury Attorney. She is Colorado native who became involved with the field of personal injury long before she became an attorney. Lauren’s professional philosophy centers around good old fashioned hard work, producing quality work product, and treating others professionally, with dignity and respect at all times.

Awards and as featured on

National Trial Lawyers Top 40 Under 40 Included in TOP 40 Under 40 by The National TRIAL Lawyers in Centennial CO Varner Faddis Top Lawyers Denver Badge – 5280 Magazine American Institute of Personal Injury Attorneys 10 Best Attorney Top 40 Under 40 5280 Denver Top Lawyers