The information in this Section is accurate to the best of my knowledge.
problem encountered in writing this Section is dealing with the fact that
claims adjusting varies from state to state. The resulting settlement
will vary depending on the verbiage of your policy and the laws that govern
insurance in the state where you reside. If you are uncomfortable with
any of the advice given in this Section, please do not act upon it until
you have had the opportunity to do the proper research.
In the settlement process people often feel the insurance company is out
give them the short end of the stick. Unfortunately, sometimes that happens.
strongly believe that the claims process is important and that's why I
have chosen to
devote an entire Section to it. In this Section I'll explain to you some
of the "ins" and
"outs" of the claims process.
1. Settling a Bodily Injury Liability Claim
If you are involved in an accident and the other party is at fault, you
entitled to be made whole financially through the other party's insurance
If the party at fault doesn't carry auto liability insurance and you carry
motorist coverage, you would be compensated through your own insurance
If the party at fault carried liability insurance, but their coverage
limit wasn't enough,
the excess amount would be covered by the underinsured motorist coverage
your policy, providing that you carry such coverage.
Bodily injury liability, uninsured and underinsured motorist coverages
designed to pay for the following:
1. Actual medical expenses
2. Actual wages lost as a result of the accident
3. Expenses for mileage to and from the doctor, therapy, trips to the
items you require and any other miles driven as a result of the accident.
4. Compensation for any temporary or permanent disability. This could
minor as a few days missed from work, to a major disability such as loss
of a limb,
loss of hearing, loss of mental capacity, or physical disablement.
5. Compensation for pain and suffering as a result of the accident.
This brings to mind the question, "How do I know the insurance company
is being fair with me in these areas?" I hope by the time you finish
you will have learned enough to adequately handle this type of claim on
without an attorney, and get top dollar in the process! Let's look at
these areas one
at a time.
1. Actual Medical Expenses
This is fairly simple. Keep records of your doctor, therapy, drug, hospital
any other related expenses incurred for medical treatment as a result
of the accident.
Most medical practitioners will wait for payment until after you have
your claim. This should be worked out in advance of services being rendered.
they won't wait for you to settle with the insurance company, then you
may want to
look for another health provider. The reason for this is when you settle
insurance company, you want it to be on your timetable. You don't want
pressured into a quick settlement by a doctor wanting his or her payment.
be more details on this point later in the Section.
2. Actual Wages Lost as a Result of the Accident
You should keep a log of all hours missed from your employment. Even if
use your sick or vacation time through your employer, you are still using
that would not be available to you for future use because of the accident.
you are entitled to have the auto insurance company reimburse you for
This should also include any time which your spouse lost from work on
as a result of the accident. In addition, keep a record of any benefits
you lost as a
result of being off work, such as sick and vacation time accumulation,
contributions to your 401 k and any other work related benefits.
3. Expenses for Mileage to and from the Doctor, Therapy,
Trips to the Store, and Any Extra Miles Driven as a Result
of the Accident
You should keep a log that lists the date of the trip, the purpose for
the trip and
of course, the miles driven. You should expect to be reimbursed at the
rate the Internal Revenue Service uses for business miles driven. An example
would be if you drove 350 miles as a result of the accident, you are entitled
receive 31 cents per mile, which amounts to $108.50 for the total miles
remember to include any tolls, parking fees and/or fares paid on public
4. Compensation for Temporary or Permanent Disability
This is a little tougher to determine, but not as complicated as you may
Let's take a short-term disability as an example. You're involved in an
suffer a broken arm. In addition to any actual expenses incurred, you
entitled to a monetary compensation for the broken arm. Most insurance
use the same method in determining these amounts. Among other things,
a chart that tells them what a reasonable settlement would be for a particular
The factors considered in determining these amounts are the severity of
the age of the injured party and the possibility of partial or total disability.
you are the more they may allow for an injury.
Normally you can get a good idea of how much they are willing to pay for
particular injury by their first offer and how they respond to your request
Most insurance companies will offer 10% to 20% below the maximum they
to pay, while others will offer you top dollar up front. No matter what
their offer is,
you should ask for 20% more. If they refuse immediately, wait a while,
time is on
your side. If after six to eight weeks they refuse to raise their offer,
they are offering the maximum they will pay. Another possibility is they
more than their initial amount, but not what you are asking for. This
gives you a clue
that there is potential for a higher settlement. Bear in mind, they may
you the 20% more that you requested, but in the long run you will still
a winner by personally negotiating with the insurance company.
The insurance company has to obtain a medical release from each injured
party in order to close their file. Usually the longer it takes, the more
eager they are
to settle the claim. Please realize this attitude may vary from company
What about permanent or long-term disability? In the event of a permanent
long-term disability or fatality, you would usually get the policy's liability
the responsible party's liability insurance. In serious cases like this,
the guess work
is pretty well taken out of the process. If the "at fault" party
has no insurance or
their policy limits are not enough to cover the loss, you would then use
limits on your uninsured and/or underinsured motorist coverages. In the
where a person has a minor permanent disability that doesn't affect their
work, etc., they may not receive policy limits but would still be compensated
As I've stated before, the insurance companies have a good idea of the
value of each disability. They know from experience and prior court cases
amount they can expect to pay for any given disability. They may bend
this amount to avoid the high costs of going to court, but they won't
write you a blank
check either! I've seen many times when the insurance company will pay
limits for a permanent disability that causes loss of income or physical
An all important question now arises, "How do I find out what the
policy limits are of
the "at fault" party?" We will answer this question later
in this Section.
5. Pain and Suffering
In addition to the actual expenses discussed above, you are also entitled
compensation for pain and suffering. A good rule of thumb for calculating
suffering is to take the total of actual medical expenses and multiply
that number by
3. For example, if your medical expenses were $3,000, you would ask for
$3,000 of which were your actual expenses and $6,000 for your pain and
This is a widely used formula and the insurance companies expect to pay
Once your bills are ready to submit to the insurance company, what next?
The last thing you want to do is call an attorney! That's right, the last
Most insurance companies will be fair with you. Involving an attorney
reduce your net settlement. The way to deal with the insurance company
submit a well documented claim and ask for an amount well above what you
expect to receive. In the case of serious injury, disability or a fatality,
you would ask for a
much larger amount. One million dollars or somewhere in that area is a
starting point. The reason you would ask for such a large amount is to
find out if the
"at fault" party carries a $1 million umbrella policy. When
the insurance company
makes an offer, you will have an idea of the responsible party's liability
limit. At this
point, they may even tell you they are offering policy limits, and if
so, your work is
done. You now know the maximum amount of coverage available to you. If
don't mention policy limits, you should ask for an itemization of their
offer. In the
itemization, you will see the limits allowed for disability, actual expenses,
and suffering. From this point, you can evaluate what areas, if any, you
negotiate. An example would be if they offered X dollars for the injury,
X dollars for
actual expenses and X dollars for pain and suffering. You will know if
offered for pain and suffering is fair based on the 3 times medical formula.
would also know if the actual medical expenses are fair by comparing their
your actual medical expense list. From this point, you can then evaluate
you want to ask for more. Usually you can get an additional 10% to settle
because the insurance company is more anxious to settle than you are.
you have is the medical release form. The insurance company cannot close
your file until they have your signature on the release form. Be aware,
an insurance company will push to have you sign the release form as soon
possible, offering you what appears to be a good settlement, but in reality
the insurance company will be settling for as little as possible. My advice
to you is refuse the initial offer and wait until your medical treatments
are over and you have fully recovered.
This could be a matter of several months to several years. Remember, time
your side but be sure to check with the state department of insurance
out what the statute of limitations is in your state. You don't want to
that time limit. In many states you have up to two years to settle, but
research it for
The last thing you want to say in your negotiations is, "I'll get
They hear this all the time and it means nothing to them other than showing
you are unsure of what you are doing! If the insurance company thinks
know what you are doing, your settlement amount might not be as high as
have been had you not mentioned the idea of an attorney. Confidence is
of the game. If the insurance company feels you know what you are doing,
you are more likely to get what you want, within reason of course.
6. Avoiding the Attorney's Gold Mine
The question most often asked, "Do I need an attorney?" A simple
no! That is the case 95% of the time. If you do hire an attorney, do it
as a last
resort, not first thing! Remember, the attorney will get a sizeable portion
net settlement. Even if the attorney gets more money out of the insurance
which he or she probably will, your net payment will probably be less.
a small claim handled by an attorney will net you about $2,000 less than
attorney handled claim. You will have an even higher dollar loss on a
dollar or policy limits claim!
I don't know about where you live, but I know where I live if it wasn't
attorneys we would not have daytime television. It seems that just about
advertisement is for an attorney wanting to protect you from the crooked
companies. They brainwash the public into thinking the insurance companies
be unfair in settling their claim and therefore, need their services!
Many times I've seen someone retain an attorney before the insurance company
even knows the accident occurred. The public fails to realize that the
company, in most cases, will be fair. You just need to give them an opportunity
respond to the situation. These ambulance chasing attorneys know this,
looking out for a sure dollar that belongs to you. They want their 35%
cut! I cannot emphasize this point enough! This is your money we are talking
about, not the attorney's. They want a large percentage of it for doing
In most cases where fault is clear, the attorney sends a letter to the
company informing them that they represent the injured party. Then they
you to settle and the attorney collects his or her check! They know from
it's a slam-dunk deal, but they see easy money and go after it! They should
tarred and feathered for such behavior. In my opinion, it's the closest
Here Are Some Common Scenarios
Your vehicle is rear-ended by another vehicle and you sustain some injuries.
This is a classic example of the other party being 100% at fault. You
choices. Your first choice is to deal directly with the insurance company
the party at fault. If they don't have bodily injury liability coverage,
you would then
deal with your own insurance company providing you carry uninsured motorist
coverage. One scenario would be you negotiate a settlement with the insurance
company for $5,000, which based on what we have discussed is a fair settlement.
You get your $5,000 and you're on your way. Same scenario, but this time
choose to call an attorney immediately following the accident so your
rights will not
be violated! The law firm is able to increase the settlement to $7,000.
based on a 35% split, receives $2,310. Guess what? You are now left with
settlement of $4,690 or a total of $310 less than you would have received
help of an attorney! In this case everyone except the attorney loses.
You have lost
$310 and the insurance buying public also lost because the additional
over and above the $5,000 could have been saved had you handled the loss
The $2,000 the attorney stuck in his or her pocket is recouped by the
company with the next rate adjustment. In cases like the one described
above, it is
a no brainer for the attorney. Why else would they advertise their willingness
come to your hospital room, or call us first, etc. Normally, they don't
do anything for
you that you couldn't do for yourself because it is a cut and dry case.
them? Attorneys know if the insurance company talks to you first, you
quickly realize that most insurance companies will be fair and that you
need an attorney, thereby cutting out the attorneys on the gravy train!
This problem is becoming so widespread that I've even heard of tow truck
drivers at the scene of an accident referring people to an attorney. In
they have referred people to a chiropractor, who in turn will refer the
person to a law
firm that the chiropractor works with. It is amazing how people will listen
who comes along and worse yet, do what they say! Is a tow truck driver
informed to advise you on medical or legal matters? In the example above,
who gets a portion of your settlement? You got it; the tow truck driver,
the chiropractor, and of course, the attorney! Think about it!
The only time you may want to talk to an attorney is if the insurance
is being unfair, and that has to be "big time" unfair. Remember,
the attorney will get
35% to 50% of your total settlement! Don't call an attorney over a dispute
settlement if it's a small dollar amount, or if it's out of pride or principle.
It can cost you big dollars for that luxury! Remember, attorneys are to
be used sparingly and
as a last resort!
What I Call the "Attorneys' Law"
Depending on where you live, you may encounter another scenario which
indeed, may require an attorney. Some states have a law that may be referred
contributory negligence. This law complicates the settlement process and
increases the need for attorneys, hence, " the attorneys' law."
This means both
parties could share in the responsibility for the accident. The idea being
that if it
wasn't a clear cut situation and both drivers could have done something
to avoid the
accident but didn't, then they both would share in the responsibility
for the accident.
An example of this would be a situation in which you are traveling down
road and as the light turns yellow, you decide to go through the intersection.
you enter the intersection the light turns red, and as you pass through
someone turns left in front of you and your vehicles collide. Who's at
because you ran the red light, or the other person for turning left in
front of you?
Based on the laws in most states, the person that turned left in front
of you would be
found at fault. But in states that have enacted the contributory negligence
of you are considered at fault. A percentage of fault would be assigned
driver. Maybe 70% to the driver that turned left and 30% to the driver
that ran the red light.
The legal profession has lobbied to have a considerable number of these
enacted to confuse the issues and create a need for their services. The
companies have excellent legal departments and can determine the percentage
fault assigned to each driver, thereby reducing the need for an attorney
7. Settling Uninsured and Underinsured Motorist Claims
The procedures for settling uninsured and underinsured motorist claims
your own insurance company are handled in the same manner as outlined
The fact that you are dealing with your own insurance company doesn't
matter, theprocedure is the same.
8. How to Settle Property Damage, Collision and
Property damage, as discussed in this Section, will deal primarily with
repair of your vehicle. While property damage liability also covers buildings,
etc., it isn't my intention to discuss that area of the coverage at this
time but to focus
on the repair of the vehicle. The major issue in repairing the vehicle
is getting the job
done right. Hopefully, with the information provided in this portion of
you will have the tools necessary to do just that, and in addition ensure
settlement with the insurance company is fair. These rules apply whether
claiming under the other party's property damage liability or under your
Getting the Job Done Right
When your vehicle has been damaged, you want the repairs to be done
correctly and the vehicle repaired to its condition prior to the accident.
thing you want to do is locate a good repair shop to do the work. If you
don't know of a good shop, the best way to find one is through your insurance
department. Most companies will have a list of approved shops that meet
requirements for repair and service. Your first thought might be that
the shop is only
looking out for the interest of the insurance company. In most cases that
in fact, it is quite the opposite. The shop receives a great deal of business
insurance company and therefore, is interested in doing a good job. If
repair your vehicle satisfactorily, the insurance company would no longer
services and the shop would lose a great deal of business. Many insurance
companies, as well as the repair shops, will guarantee their work if it's
done by a
shop on the insurance company's approved list. In conclusion, using the
company's approved shops will generally give you the best repair and service
However, choosing a repair shop is your decision.
If there is a repair shop you want to use other than those on the approved
list, you have the freedom to do so. A problem you may encounter is if
the work is of
poor quality, you would not have the insurance company's backing to ensure
the work is done to your satisfaction. Remember, it isn't the insurance
responsibility to repair the vehicle, but only to compensate you for the
Several times, on behalf of a customer, I've contacted a shop on the approved
and told them if the repair wasn't done right I would notify the insurance
requesting the shop be removed from the approved list. You would be surprised
fast things got resolved! If the shop had not been on our approved list,
have been nothing I could do to help.
Another question frequently asked is, "Why is it when you go into
shop they immediately ask if it is an insurance claim or are you paying
repairs yourself?" If it's an insurance claim the price is usually
would think it shouldn't make a difference, but it does. This is another
how you and I, the insurance consumer, are being taken advantage of by
the insurance industry. It is my opinion that the insurance industry is
to blame because they tolerate, and even in some cases, encourage such
activity. In the case of a small
claim, you can get your compensation from the insurance company and then
the work done for less than if you had told the repair shop it was an
The savings realized by doing this is yours to keep. If the insurance
to overpay you, that's their problem!
If you shop for the work that needs to be done, you will find a substantial
spread between the estimates received from the various repair shops. These
could vary by as much as 30%. What you must do is ask what methods of
your estimate is based on. This is the only way to measure which shop
is really the
best deal! Examples of the different repair methods would be: the sheet
be replaced or filled, or the paint could be applied only to the damaged
area or to the
entire side or section of the vehicle. These issues are very important!
You want the
painted area to match because in time it may fade, and you don't want
spots that are obvious thereby revealing the damaged area. Are they using
salvaged parts? If they use new parts, are they factory parts or "after
parts? These are some of the issues you will face in getting the vehicle
all things are equal, the price of the repair should be fairly close from
shop to shop.
Whether you choose a shop based on the insurance company's approved
list, or a shop of your preference, the above rules apply! In all my years
of experience, there are only a few shops that I can recommend without
hesitation because I know they will do the job right. Keep in mind not
all repair shops are created equal!
Total Loss Vs. Repairing the Vehicle
You may run into a situation where your vehicle appears to be a total
the insurance company wants to repair it. The basic premise for repairing
vehicle is the value of the vehicle versus the cost of repair. If the
cost to repair the
vehicle is less than the value of the vehicle, they will repair it. If
the cost of repair is
more than the value of the vehicle, they will total it!
Many times I've heard people say, "I don't want the vehicle repaired,
never be the same." They might be right, but the insurance company
about that. They are looking strictly at the value of the vehicle versus
the cost of
repair. You may wish to sell the car after it's repaired, and that's your
many times it can be the wrong decision if the repairs were done correctly.
shop can repair a vehicle to be of better quality than originally built
Most insurance companies authorize the use of salvaged or after market
parts. If this is of concern to you, check with the prospective insurance
before you purchase the policy. You may have a hard time finding an insurance
company that doesn't use these kinds of parts. In my way of thinking,
it's really not
a problem if the part isn't a wear part such as an axle on a four wheel
drive or some
other part that can wear out. Sheet metal salvage is preferred over after
parts because you are getting factory parts that meet factory specifications,
though the parts are used. What is meant by sheet metal salvage is a door,
quarter panel, etc., from a wrecked vehicle. The only exception to this
would be if
the part came from an area of the country that has rust problems, in which
would be concerned.
You may also find yourself in a situation where your vehicle has been
however, it is an older vehicle and in excellent driving condition. You
are still entitled
to be compensated for the damage even if you decide not to fix the vehicle
the money in your pocket instead.
An example would work this way: You have a vehicle worth $3,000 and it
damaged in such a way that it doesn't affect its safety or the way it
damage is estimated at $1,500. It doesn't take much to do that amount
of damage at
today's repair costs. If you plan to drive the vehicle for several years,
you may want
to save the insurance money and apply it to your next vehicle purchase.
If you drive
that vehicle until it's about worn out, that $1,500 damage won't make
a great deal of
difference in the price when you sell it. I've seen many times when an
company totaled a vehicle that could be driven safely. If you desire,
you can always
purchase your vehicle back from the insurance company for salvage value.
example, the vehicle was worth $3,000 and you had a $500 deductible. Your
numbers would look like this. The value of the vehicle is $3,000 minus
deductible minus the salvage value of $300, leaving you with a settlement
and your damaged vehicle. You have the option of doing this when you settle
total loss, regardless of the value of the vehicle.
Most insurance policies covering collision and comprehensive are written
an actual cash value at time of loss basis. On new vehicle leases or purchases,
can usually buy new for old replacement coverage that will replace your
a new one of like make and model, rather than allowing used value for
Of course, there is an additional cost for the coverage, but well worth
it if you don't
want to take the risk of being "upside down" on your loan or
lease. Being "upside
down" means that the vehicle was a total loss and you owe more on
the loan or
ease than the vehicle was worth. This is a common occurrence in the first
four years after one purchases or leases a new vehicle.
If you don't have replacement cost coverage on your vehicle and it is
loss, the compensation will be actual cash value at time of loss. If you
don't think it's
a fair settlement, ask them to supply documentation showing how they arrived
settlement amount. If you're unhappy with their explanation, ask where
purchase a comparable vehicle for the settlement amount offered plus your
If they are unable to supply you with that information, you could do some
on your own and present your findings to the insurance company. It's a
bit of work,
but in my opinion well worth the extra effort. Usually it will increase
to a fair amount!
I am confident that the information in this Section will be of benefit
to you in
the event of a claim, whether it's against your own insurance company
or the company of another motorist responsible for causing the accident.
Hopefully, you will never
have to use the information in this Section, but if you do, it will prove
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