How Do Insurance Companies Determine Settlement Amounts?

man signing paperwork

Insurance companies typically become involved in determining settlement amounts as a result of various types of negligence claims, including, but not limited to, personal injury cases, car accident cases, and medical malpractice cases. Since these types of lawsuits are among the most stressful for the parties involved, it’s important to ensure that you understand how insurance companies determine settlement amounts to guarantee you are properly compensated for any pain and suffering you have endured. Settlements are typically the best option for claimants as it ensures the parties do not have to participate in a trial.

If you are unsure whether you are receiving a fair settlement amount from your insurance company, get a second opinion from Jack Bernstein, Injury Attorneys.

How Do Insurance Companies Determine Liability?

In situations where fault is not easily determined, it is likely that a settlement offer will be lower or there will be no settlement at all. Similarly, shared negligence among parties also has a significant impact on settlement amounts. There are three different types of negligence to be considered when determining liability in situations where the fault is shared among parties: contributory negligence, pure comparative negligence, and modified comparative negligence

Pure comparative negligence states allow a driver to collect compensation from other parties to the accident despite whether the driver is primarily at fault. Modified comparative negligence states permit a driver to pursue claims for compensation if the driver is not 50 or 51 percent liable for the accident. Lastly, in states that follow contributory negligence, if a driver is just one percent liable for the accident, the driver is ineligible to receive any compensation from any other parties who were more at fault for the incident.

Car Accident Settlement Examples

Car accident settlements can vary greatly, as there are many different factors that make each claim unique. According to the Insurance Information Institute’s 2020 data, the average claim for property damage related to a car accident was $4,711, while the average claim for bodily injury after a car crash was $20,235. Further, the average for non-injured accident victims was  determined to be $16,700

If you are unsure whether your insurance company properly determined liability, get a second opinion from Jack Bernstein, Injury Attorneys.

How is a Settlement Value Determined?

There are many factors that must be taken into account when insurance companies determine liability, such as state laws, pain and suffering, emotional distress, property damage, and monetary loss. These factors are also known as special damages and general damages. Special damages constitute any financial loss that results from the accident, while general damages constitute any non-monetary losses that may stem from the accident. 

By considering special damages and general damages, insurance companies can determine appropriate settlement amounts. In situations where an accident victim sustained severe injuries that prevented them from returning to work, insurance companies will likely decide on a high settlement value to compensate the victim for medical bills and lost wages. Whereas in a less severe accident where the victim only sustained minor injuries and was able to return to work immediately, the settlement value will be much lower. 

Overall, there is no one set value that insurance companies are able to offer claimants, due to the unique aspects of each case. It’s important for claimants to understand that there are no particularly average settlement offers during mediation because of the unique elements of car accident claims. An insurance adjuster will likely offer a different insurance settlement to each claimant they encounter.

The Damages Formula

One of the most common methods for determining a car accident settlement is called the multiplier formula. This formula takes the total of the accident victim’s medical bills, multiplies that amount, and then adds them together with any lost earnings and future lost income. This realistic settlement calculator allows the insurance company to create a general estimate of what the settlement amount should be.

Is it a Good Idea to Accept a Settlement?

While there are many factors involved in determining whether you have received a good settlement offer, it is typically in a claimant’s best interest to accept a settlement offer after suffering from a car accident. The alternative to accepting settlement offers is usually taking the case to trial, which can lead to many additional stressors that need to be taken into account. Trials can be long, stressful, tedious, and costly. Plus, there is no guarantee that you will walk away from trial with any compensation. Whereas if you are offered a settlement, you have a guarantee of compensation. 

A good car accident attorney will guide their clients in the proper direction and inform them whether accepting a settlement or taking the case to trial will result in a better outcome. While accepting a settlement offer is generally the safer route, it may be best for other cases to go to trial, so there is not necessarily one right way to approach car accident cases.

If you are unsure whether to accept a settlement offer from your insurance company, get a second opinion from Jack Bernstein, Injury Attorneys.


Facts + Statistics: Auto Insurance. (2022)

Beiber, C. Typical Car Accident Settlement Amounts. (2022).

Goguen, D. (2022). Is There a Car Accident Settlement Formula?