Behind the scenes understanding the insurance company settlement formula

Sam Richards
Authored by Sam Richards
Posted Monday, June 15, 2020 - 7:43am

Insurance is a hugely profitable business across the globe, and gross premiums continue to rise year on year.

In order to maintain the levels of profitability in the industry, insurance companies have developed a highly sophisticated settlement process. This ensures that the amount they pay out remains lower than the amount they take in in the form of premiums.

For those without professional experience in the industry, the insurance company settlement formula can be difficult to understand.

Read on as we explain a little more about this formula.

The Insurance Company Settlement Formula

There are many factors that insurance companies take into account when they settle claims. If you've had an accident, these are the things that will dictate how much you get as compensation.

You should note that no insurance company will share their exact formula with you, and the formula will vary from one insurance adjuster to the next.

However, some factors are common to all payout structures. We've listed some of the most important ones here.

Medical Bills

If you've suffered an injury, your most pressing financial need is likely to come in the form of medical bills. If you have ongoing care requirements, medical bills can stretch into six figures.

You may even have medical needs that continue for the remainder of your life. An issue like chronic pain could require treatment for many years.

Lost Earnings

After medical bills, your income will be the most important consideration. A severe injury is likely to render you unable to work for a considerable period of time, which may have major knock-on effects in terms of paying the bills.

For this reason, insurance companies must make allowances for lost income when paying out on claims. 

The precise amount to which you will be entitled will depend on your policy. 

Pain & Suffering

If you suffer a serious injury, your insurance company will be liable for more than just your financial costs. Courts have often required that injured parties receive financial compensation for the trauma they endure.

The extent of this obviously varies widely from one injury to the next. Psychological trauma (such as from seeing someone else grievously injured) may also be taken into account.

Special Damages

This category of compensation refers to any special considerations which might be relevant to your case. Special damages usually come in the form of a multiplier on one of the other categories of damages. 

Making Sure You Get a Proper Payout

The insurance company settlement formula can be difficult to get your head around. However, that doesn't mean you should accept anything less than the amount of compensation that is appropriate for your loss.

If you think your insurance company has left you short, you should consider hiring a lawyer.

Did you find this article informative? If so, have a look at some of our others! We post content on both local and national news.

 

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