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Is a lowball settlement offer a kind of bad faith insurance?

| Dec 8, 2020 | Insurance Law |

Insurance companies charge you money for protection against unforeseeable issues like car crashes or a tree falling on your home during a severe storm. The company calculates how much to charge you based on your risk and claim history, as well as your credit and other factors.

They profit when you pay your premium but don’t actually need to file a claim, which means they have an incentive to deny as many claims as possible. In order to ensure that insurance companies fulfill their obligations to paying policyholders and valid claimants, there are federal and state laws carefully regulating the insurance industry.

Specifically, there are laws against bad faith insurance practices, which means it is illegal for an insurance company to deny valid claims. If your insurance company has offered you a ridiculously low settlement offer, do you have to accept that lowball offer?

Low initial offers can be a negotiation tactic or a sign of bad faith insurance

There are insurance adjusters who will open with a low first offer because they expect the claimants or their attorney to counter with a higher request. Provided that the insurance company does eventually increase its offer after negotiations, a low initial settlement offer isn’t inherently a bad faith insurance practice. It is simply good business.

Still, if you accepted a lowball insurance offer that didn’t cover all your costs or if the company refuses to negotiate, then you could very well be the victim of bad faith insurance practices by a company that puts its profits ahead of legal compliance and its obligations to policyholders and the public. Bad faith insurance could also involve denying a valid claim, or taking months or even years to pay.

How do you handle a lowball insurance offer?

If your insurance company wants to fight with you over every penny, don’t let them push you around. Partnering with an attorney will make it easier for you to negotiate with them and counter offensively low initial offers.

If negotiations don’t work or if you only go to an attorney after you realize how inappropriate the settlement truly was, a bad faith insurance claim against the company may also become necessary. The sooner you discuss the situation with a lawyer, the more help you will have to advocate for yourself as you seek the compensation you deserve.