How Do Car Accident Settlements Work?


A car accident settlement may happen when the parties involved in a car crash agree on a settlement amount to cover the costs of injuries and property damage. A victim might accomplish this before trial in a pretrial settlement, or it can occur during the middle of a trial.

A pretrial settlement happens when the parties in a lawsuit agree to work out compensation for car accident injuries and damages before trial. Rather than take the case to court and go to trial, the parties negotiate. This can happen out of court, occasionally with a mediator present for negotiations.

Car accident settlements are a contract stating that the responsible party will reimburse the victim a specific amount of money to pay for the losses they caused. Settlements are typically looked upon approvingly because they manage to save the parties time and funds.

Rather than spend multiple weeks or months going through the court, the parties can agree on a settlement and move on. The parties concerned must be ready to work cooperatively for a settlement to work out successfully.

What Are Car Accident Settlement Payouts?

What Happens If the Other Party Will Not Expend the Settlement Payments?

car accident lawyerCar accident settlements can occur in two ways. One is through a structured settlement, where the insurance company makes payments in regular installments over time. A structured settlement allows the plaintiff to bypass the tax consequences of receiving considerable amounts of money at once. Structured settlements are occasionally referred to as “annuity payment” plans.

On the other hand, a car accident settlement payout can happen where the plaintiff accepts the cash in a lump sum payment. This is known as a settlement cash payout. A settlement cash payout entitles the individual to obtain the funds they are entitled to without delay. Nevertheless, there can be significant tax detriments to receiving considerable cash at once.

One of the most significant drawbacks to annuity or structured settlement plans is that the paying party may cease making payments in the future. This can be due to them going bankrupt or merely refusing to pay, although such agreements are legally binding. Because of this, some individuals prefer to have a car accident settlement payout to guarantee that they do not have any issues in the future in terms of obtaining what others owe to them. The significant tax results may be worth it, depending on the case.

If the defendant cannot make the full lump sum payment, the court may occasionally take other steps to ensure that the defendant pays the total amount. An example is how the court may put a lien on the individual’s property and sell it to satisfy the payment amounts.

What Issues Should I Consider to Get a Fair Settlement?

It is essential to have a fundamental understanding of the purpose of a settlement. The goal of a settlement is to bypass the trial process whenever possible. This happens through an agreement where the plaintiff forgoes the freedom to seek a trial in exchange for a sum of cash or an act by the defendant.

Both parties must understand what they want to get before entering into the settlement negotiation. Settlements always need an attorney or a mediator.

When consulting with your lawyer about the settlement, you should discuss:

  • Your possibilities at trial and whether a lawsuit is vital;
  • The amount that you believe your case is worth in terms of dollar amounts;
  • Discuss the lowest number that you will accept or pay to settle
  • Results and settlement amounts from comparable earlier cases;
  • The strengths and shortcomings of the evidence for both the opponent’s claims as well as your case;
  • The amount of insurance coverage and economic resources available to the opposing party;
  • The effect of any settlement payments on related matters, such as lawyer’s fees and tax developments; and
  • If you are the plaintiff in the accident, evaluate whether remedies other than financial payment are necessary.

What Else Should I Understand About Car Accident Settlement Payouts?

Settling a car accident without going to trial can deliver several benefits.

Some of the most significant benefits include:

  • Fewer Expenses: A trial can be costly for both parties. In addition to lawyer’s fees, consider court fees that settling outside of court bypasses.
  • Less Stress: Although many court trials do not last more than a couple of days, the procedure can be stressful. There will be no need for cross-examination, expert witness testimony, and other required steps that sketch out the trial procedure with a pretrial settlement. Further, a settlement sidesteps appearing in court altogether, which can be nerve-wracking;
  • Damage Awards Are Inconsistent: The jury awards the damages when you go to trial, and there is no negotiation opportunity for either party. Sometimes, the plaintiff may receive a lesser amount at a jury trial than they might receive in a pretrial settlement. It may be in the plaintiff’s soundest interest to have fewer individuals involved when deciding how much of an award they are to obtain;
  • Less Time Expended on Appeals: If the defendant chooses to appeal the case’s outcome, it may take more than a year to finish the total procedure. Appeals are generally not permissible in a settlement; and
  • Increased Privacy: Settlements are confidential, whereas court trials are not. The components of a court trial are public records. Parties interested in upholding a more elevated level of privacy should opt for a settlement instead of going to trial.

The plaintiff can accept their award after they reach an acceptable settlement agreement. After the parties decide on a specific pretrial settlement agreement, insurance companies typically make payments within 20 or 30 days. Usually, the settlement agreement will note the time frame for the defendant to pay the agreed-upon amount.

The settlement agreement may also describe whether the plaintiff can add interest to the initial amount owed if the defendant does not pay within the agreement’s stated time.

What Is the Formula for Car Accident Settlements?

Taking a case to trial can be very expensive for all parties concerned. The award of damages can be pretty inconsistent because of the hardship in assessing the value of your claim.

A pretrial settlement can bypass the tensions of trial.

How Do Insurance Companies Determine the Value of Car Accident Cases?

Car accidents are pretty typical and result in thousands of claims against different insurance companies throughout the year. With a lengthy history of replying to claims, insurance companies have gathered data on these crashes and payouts that enable them to develop criteria for resolving future cases.

Ultimately, claims are determined based on the individual facts in the case, but there is some predictability in the data that insurance companies weigh in valuing your claims.

They use a formula that considers your specific damages (economic loss) and general damages. Then, they multiply that loss by a particular numerical element they determine based on their statistics. This means that your actual economic losses can convey only a part of what the insurance company eventually may evaluate your claim’s value.

What Are Some Typical Damages Victims Seek in Car Crash Claims?

The types of damages in cases involving car wrecks are relatively standard. The most typical are called special damages, which include medical costs, and general damages, which include claims for emotional distress and pain and suffering.

Some of these non-specific damages are particularly difficult to quantify, making it challenging for you to establish your claim. Insurance companies will consider this when resolving how much to pay out to you.

#1. What Are Special Damages in a Car Crash Case?

Special damages, also called economic damages, correlate to the plaintiff’s actual out-of-pocket costs. These are tangible damages that can be quantified and confirmed by supporting documentation. Examples of special damages include medical expenses and lost wages.

#2. What Are General Damages in a Car Crash Case?

In disparity to special damages, general damages are not so readily quantified and verified. Subjective in essence, they contain claims for pain and suffering, emotional distress, future medical care, disfigurement, and loss of consortium.

#3. How Do You Establish Medical Costs After a Car Crash?

You can get damages for exact medical bills relating to reasonably incurred expenses for treatment associated with a defendant’s negligence in a car crash. You should present copies of your medical bills to prove your legitimate medical expenses.

A skilled expert witness can attest to the reasonableness of the expense of the medical costs and that the medical treatment arose from the car crash.

#4. What are Multipliers in a Car Crash Case?

The insurance company has chosen your specific losses established by your supporting documentation. They will now increase that number by a specific multiplier to establish what they believe to be the total value of your claim.

There are no absolute elements that the insurance company will evaluate in resolving how much to multiply your claim by. Instead, that is chosen based on the facts of your claim.

Nevertheless, the insurance company may ask:

  • How much are your total medical bills?
  • Was the medical treatment required?
  • Did you pursue treatment for a condition pre-existing the crash?
  • Did you pursue long-term treatment for your damages?
  • Did your acts play any role in the crash?

You were hurt in a car wreck but did not see your physician until the next week, or you only had one or two physician’s visits due to the wreck. You did not miss any time from work, and your total medical bills were less than $2,000.

If the insurance carrier chose to multiply your actual losses, it might do so by a lower factor, perhaps by two. Your claim might now be $4,000 instead of $2,000. These facts indicate that it is doubtful the insurance company will multiply your actual damages by a factor more significant than two.

Assume the accident’s circumstances indicated that you were instantly treated at a hospital and incurred medical bills of $10,000. In that circumstance, the insurance company may choose to use a more significant multiplier in your claim, and instead of $10,000, you may end up with $25,000.

The critical thing to keep in mind is that the individual facts of each claim will dictate how the insurance company calculates the absolute value of your claim.

Do I Need to Call a Lawyer for a Car Accident Settlement Claim?

Dealing with an insurance company following a car crash can be very stressful. While it is possible to guide the situation on your own, circumstances might problematize the situation.

Consulting a local car accident lawyer may help you comprehend your privileges and what you should do if a car crash hurts you.

In almost all settlement efforts, you will need an attorney to help you bargain your position. Further, choosing a payout vs. annuities can occasionally be a hard selection to make. You should consult with a local car accident attorney if you need legal guidance regarding car crash settlement payouts.

A local lawyer will be most knowledgeable of what regulations your state has that can impact the result of your case, as the rules governing settlements can be very distinct from state to state.

A professional and knowledgeable lawyer can help you in court and out of court and help assure that your legal privileges are fully covered and represented. A lawyer can prepare you to enter the settlement on solid ground and set you up for a profitable agreement.

Should settlement attempts fail, an experienced local lawyer can also represent you in court to fight for your full compensation.