What Happens If I Turn Down the Car Insurance Company's First Settlement Offer?

The car insurance company's first settlement offer is often just that—a first offer. So what are your options as far as a response?

Updated by , J.D.
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  • We've heard a number of variations on this question from car accident claimants. Here's what to know at the outset:

    • A first car accident settlement offer is usually just that, one of perhaps many offers to come as part of the settlement negotiation process, and it's almost never a good idea to accept a first offer from the car insurance company.
    • In response to a first car accident settlement offer, your options include putting together a demand letter and making a counter-offer, and don't worry that the insurance company might "revoke" its first offer.
    • Timing aside, it's crucial to understand the nature and extent of your car accident injuries, and the full scope of your other losses ("damages" in the language of the law) before you accept any settlement offer.

    What Should I Know About the Car Insurance Company's First Settlement Offer?

    Many car accident claimants wonder whether they can or should turn down their lawyer's first settlement offer. So first, let's explain that a car accident settlement offer is not actually coming from your lawyer. The driver who was at fault for the accident (assuming that's not you) is going to be responsible for your damages—that means the cost of your medical treatment, lost income, your vehicle damage, and any other losses tied to the accident. (It's a different story in the dozen or so no-fault car insurance states.)

    So, assuming the at-fault driver has car insurance, the settlement offer is going to come from the other driver's insurance company, and if you have a lawyer, they will be the intermediary. But it's the insurance company that is making the offer. In some situations a settlement offer might be coming from your own insurance company; if you're making a claim through your own uninsured motorist coverage, for example.

    The most critical points to keep in mind about the insurance company's first settlement offer are:

    • it's almost always going to be a low (sometimes very low) offer, in comparison with what your car accident claim is actually worth
    • it's almost going to come too early to capture the complete picture of your losses, i.e. before you've fully recovered from your injuries, and before you have an understanding of the fair value of your claim, and
    • it's almost never going to be the last offer.

    Why You Most Likely Shouldn't Accept the Insurance Company's First Settlement Offer

    Think of the insurance company's first offer as the kick-off to settlement negotiations, and always remember that the insurance adjuster handling your claim works for a company whose priorities all revolve around one thing: the bottom line. At every step of the claim process, the adjuster is going to do everything they can to minimize the insurance company's financial exposure.

    In plain English, that means, from a dollars-and-cents standpoint, the adjuster is going to commit the absolute bare minimum amount of the company's money to make sure you and your claim go away. They'll often gladly dangle several hundred (even several thousand) dollars now, in the hopes that you take it. If you jump at this first offer, you're playing right into their strategy. If you reject the offer—politely, firmly, unequivocally—it gives the adjuster a good indication that you understand how the game works and you're ready to stand up for yourself.

    Don't Settle Too Soon

    As we mentioned above, the insurance company's first settlement offer usually comes pretty early in the claim process, often before you've finished receiving medical treatment for your injuries, so that you don't yet have an idea of how much your claim might actually be worth. That's usually baked into the insurance company's strategy at this stage. The hope is that you'll accept quick payment early on so that the claim (and the door to any future financial recovery) will be closed for good.

    When you agree to a car accident settlement, before you get your check, you'll need to sign a form called a "release" in which, as the name suggests, you release (give up) your right to take any further legal action in connection with the underlying car accident. So, even if it turns out that your car accident injuries are worse than you realized, and your claim is worth much more than the settlement amount, once you've signed the release, you've lost your right to any additional compensation. Of course, the insurance adjuster knows this, and they're often hoping you don't. Learn more about what you need to know before signing a release in your car accident case.

    What Happens if I Reject a Settlement Offer? Will They Revoke It?

    The short answer here is almost always "No." Rejecting the car insurance company's first settlement offer will almost never lead to a revoked offer (meaning the insurer pulls the offer and refuses to negotiate further), or be followed by an even lower offer. In the vast majority of settlement scenarios, saying no to the first offer is a necessary first step on your way to ensuring you get a fair outcome for your claim.

    The complexity and duration of car accident settlement negotiations will depend on the seriousness of your injuries, whether fault for the car accident is fairly clear or very much in dispute, the amount of insurance coverage that's available, and a whole host of other factors. But unless the insurance company sees your claim as completely without merit, and is offering you a few hundred dollars in a take-it-or-leave-it "nuisance value" settlement proposal, the adjuster is almost certainly anticipating a rejection of the first offer, and your saying no will only spur on the settlement negotiation process.

    What To Do After Receiving the Insurance Company's First Settlement Offer

    After the car insurance company's first settlement offer comes in, now would be a good time for you and your lawyer to draft and send a detailed demand letter to the at-fault driver's car insurance carrier (send it to the attention of the insurance adjuster who made you the first settlement offer). And if the insurance company's offer seems unreasonably low, it's time to ask the adjuster to provide specific support for their position.

    Draft and Send a Demand Letter to the Insurance Company

    A demand letter is your chance to methodically present your side of the story—how the accident happened, who was at fault, what medical treatment you've received so far, the prognosis for your recovery, how the accident and your injuries are impacting your life, and any other information that helps your case. The letter will include details on all of these aspects of the case, and will also include a dollar figure that you would be willing to accept in order to settle the case. Get more tips on writing a winning demand letter. And check out our sample demand letters to get an idea of what this kind of correspondence might look like:

    If the Settlement Offer Seems Unreasonably Low

    It's one thing for a first settlement offer to come in significantly lower than what you (or your lawyer) have in mind when it comes to what your car accident claim is worth. It's another thing for the first offer to be so low that serious settlement negotiations don't seem feasible—you and the insurance company are simply too far apart.

    If you find yourself in this situation, it's time to ask the insurance adjuster to clarify their position with evidence, or at least solid reasoning. Ask them to provide a detailed response to each of the arguments or assertions you make in your demand letter, including:

    • your characterization of how the accident happened, and who was at fault for the crash, and why
    • the nature and extent of your damages, including the legitimacy of care provided by (and medical bills received from) each health care provider who treated you for your car accident injuries
    • your description of how the car accident and your resulting injuries have affected you, both physically and mentally (this kind of information relates to your "pain and suffering" damages), and
    • your dollar-figure demand.

    Learn more about when and how the insurance company might respond to your demand letter.

    What is a Good Settlement Offer, and When Should I Accept the Insurance Company's Settlement Offer?

    So far, we've provided plenty of reasons why you shouldn't accept the insurance company's first settlement offer, and why it's crucial to wait:

    • until you understand the full value of your car accident claim, and
    • the insurance company's offer is in that ballpark.

    The other side of those words of caution are: Only accept a car insurance settlement (and sign a release of your right to take any further legal action over the crash) when:

    • you've finished receiving medical care in connection with your car accident injuries, and you've fully healed (or you've reached a point of maximum medical improvement)
    • you have a full understand of the spectrum of your damages resulting from the accident: your medical bills, your lost income, your physical and mental "pain and suffering," and any other negative effects of the accident; and you've quantified these categories of damages, attaching a dollar value to each
    • you have a complete picture of the available insurance coverage (yours and the other driver's) that, taken together, might be used to compensate you for your damages
    • you've made a thorough calculation of the fair value of your car accident claim, and of the amount you'd be willing to accept as settlement, and
    • the insurance company's latest offer falls somewhere above (or at least near) those thresholds.

    Making a Counter-Offer, and What Comes Next

    After the insurance adjuster's first offer in your car accident case, you have every right to respond with your own counter-offer. Again, you may get the best results by putting your counter-offer and your supporting arguments into a detailed car accident demand letter.

    While every case is different, here is the course that a typical car accident settlement might follow when it comes to settlement offers, counter-offers, second settlement offers, and more:

    • The insurance company makes a first settlement offer that is almost always less than what your claim is probably worth.
    • You (and your attorney) respond with a detailed car accident injury demand letter that asks for more (sometimes much more) than what the insurer offered, plus a counter-offer.
    • The insurance adjuster comes back with a second settlement offer, which may or may not be in the ballpark of your counter-offer and/or what you (and your attorney) would be willing to accept to settle your car accident case.
    • You and the insurance adjuster exchange a few more letters and make a few more phone calls where you try to keep the settlement figure in the higher range, and the adjuster tries to bring the figure down.
    • You and the adjuster arrive at a final settlement figure that is satisfactory to both sides. You sign a release of liability and the insurance company cuts a check.

    Your claim might not go through this much back-and-forth, especially if you've suffered only minor injuries (or no injuries) and the insurer's liability is limited mostly to vehicle damage.

    What If the Insurance Company Is Ignoring or Delaying My Claim?

    If you feel like the insurance company isn't taking your claim seriously, or if you think they're delaying the investigation or processing of your claim, there are a number of steps you can take.

    First, in a letter or email, write to the insurance adjuster and politely but firmly ask for a status update on your claim by a certain date, perhaps 10 days or two weeks from the date on which you're sending the correspondence. Ask the adjuster to identify any information or documentation they're waiting on, so that you can help provide it.

    If the status update doesn't come, or you don't find the response satisfactory, remind the adjuster that you've got plenty of time (under your state's statute of limitations) to escalate things by filing a personal injury lawsuit in court over the car accident, and that you're ready and willing to do just that if you don't see real progress on your claim (and indications that the insurance company is taking your claim seriously) soon.

    Finally, if all else fails, let the adjuster know that your frustration with the insurance company's response has forced you to consider turning the claim over to a car accident lawyer.

    Getting Help After a Car Accident

    Once the insurance company knows that it's going to be negotiating with an experienced legal professional rather than a novice claimant, you might be surprised at how swiftly they come to the settlement table with a fair offer.

    You can always handle a car insurance claim on your own, but if you've got serious injuries and your full medical recovery is expected to take some time, or the insurance company is showing signs that it's not taking your claim seriously, there's no substitute for a lawyer's experience and expertise.

    Learn more about how a car accident attorney can help you and how to find the right injury lawyer for your car accident case.

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