Your insurance claim settlement offer arrives. It’s too low. It’s not even close to the right amount.
Now what?
Our experienced Houston insurance claim lawyers at Haun Mena explain what to do when an insurance settlement offer is too low.
What to Do When the Insurance Company Lowballs
When the insurance settlement offer is too low, ask for a detailed explanation of how they determined the amount. Review their calculations.
Compare their information with your own calculation of the claim value. See where you disagree.
Provide more information
If there is more information you can provide, such as an appraisal or evidence of loss, obtain it and submit it to the insurance company. Ask them to reconsider.
Internal review
If the insurer has a formal internal review process, follow the steps. Although this might seem like a waste of time, it can route the claim to another person for review. Plus, it shows the insurance company that you’re serious about pursuing your claim.
Negotiating can help at this stage, but it must be strategic. A lawyer can help you.
Next steps
When the internal review and direct negotiations don’t get anywhere, it’s time to take the next steps. That may mean filing a legal claim.
More from Haun Mena:
How to File a Complaint Against Your Insurance Company
A few more tips
Statute of limitations
As you negotiate, don’t forget that there’s a statute of limitations to start a legal claim. Missing the deadline can mean losing your right to file a claim. That’s true even if you’re talking to the insurance company. Work with a lawyer as soon as possible.
Document everything
Keep track of all communications with the insurance company. This can help you organize your negotiations. It’s also important later if you pursue a bad-faith action against the insurance company.
Don’t sign the release
Don’t sign the release until you’re accepting the settlement offer. Signing a release means accepting the amount and ending the claim. If you want to pursue a higher settlement, hold off on signing the release for now.
How Insurance Companies Calculate Initial Settlement Offers
Insurance companies use software programs to calculate settlement offers. These formulas take a variety of factors into account, such as materials and labor costs. The insurance representative enters the claim details, such as damaged items and measurements. The software program produces an offer amount.
These software programs are written with profits in mind.
Signs You’ve Received a Lowball Offer
Here are some signs that your insurance settlement is too low:
No details. The insurance company won’t explain how they calculated the offer.
Missing information. Calculations are missing key categories of losses.
Discrepancies. There’s a big discrepancy between your repair estimate and the offer.
Fast turnaround. You have the offer in hand before they’ve had enough time to evaluate it thoroughly.
Hidden damages. Structural damage that doesn’t show in photos isn’t fully accounted for.
Pressure to settle. You’re pressured to settle quickly.
Unfair valuation. Wear and tear and depreciation are overstated.
If you see any of these warning signs, you can investigate further. A lawyer can evaluate your offer to see if it’s too low.
What ‘actual cash value’ vs. ‘replacement cost’ means for your settlement
Something important to understand when evaluating your settlement offer is the difference between actual cash value and replacement cost. Your insurance policy will have one or the other.
Actual cash value
If you have actual cash value coverage, they’ll pay you for the current value of the loss. It’s not what you paid to build or purchase the items. It’s not what it’s going to cost to replace them, either. Depreciation gets factored in.
Replacement cost
If you have replacement cost coverage, they’ll pay what it costs to replace the damaged property. That’s going to be a higher amount than the actual cash value.
When you have actual cash value coverage, the offer can seem low when it’s not. But insurers also use actual cash value policies to lowball an offer. They must still offer you what’s fair, based on your policy coverage.
The Negotiation Process: What Happens When You Reject an Offer
When you reject an insurance settlement offer, the claim stays open. You may hear nothing from the insurance company. This might be intentional on their part. They might be hoping that you just give up.
It’s common for them to send another offer that’s only slightly higher than the first one. Usually, if the first offer was too low, it’s still going to be too low to accept.
Sometimes, they bury you in paperwork. They may say that they’re reconsidering. But what they’re really trying to do is wear you out.
The counteroffer
It might be time to send a counteroffer. A counteroffer should be crafted carefully. It must explain why the offer is too low. It must include supporting documentation.
When Negotiation Stalls: Your Legal Options in Texas
If the insurance company just won’t change its offer, there are things you can do. You can file a legal claim. Property damage disputes are often for high amounts. A legal claim may be worthwhile.
An attorney can explain the steps involved in a claim. At Haun Mena, we offer full-service legal representation.
More from Haun Mena:
Was Your Insurance Claim Wrongfully Denied?
Why Having an Attorney Changes How Insurers Negotiate
When you have an attorney, the insurance company knows that you have a level playing field. You have someone experienced in the law and in the process. The insurance company knows that we’re explaining to you what your case is worth. They know that you’ll take your case as far as necessary, including to court.
Your attorney talks to the insurance company, so confusing, high-pressure tactics won’t work. Plus, the insurance company knows they could face bad-faith damages if they continue to lowball your claim.
Talk to a Lawyer
If you think your insurance settlement offer is too low, we invite you to talk to an attorney. Contact Haun Mena for a case review. See what your case might be worth and how a lawyer can help. Call or message us now.
