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When an Insurer Offers You a Settlement of Your Claim

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By Scott B. Elkind, Esq.

There are times when an insurer may offer a claimant a settlement of the claim. Usually, the offer comes out of the blue with no advance warning. You will receive a letter stating that your claim “has been selected for early settlement.”

Sometimes, the insurer just wants the claim off the books and may be making a fair, albeit reduced, offer of settlement. More often, the offer is not fair and is an attempt to tempt or coerce the claimant to take it.

To get a better understanding of how these claims are valued is worth your calling an attorney who can advise you as to whether you should accept/reject/counter the settlement offer. As there are many considerations to each offer depending on your age, condition, severity of disability, etc., there is no one answer to the question.

Whatever you do, do not panic as there are ways to deal with the situation. First, you will be angry as the offer is worth less than your future benefits. This anger is justified to a certain extent. The insurer isn’t making the offer for your benefit, but rather its own. Not only will the insurer save itself a good percentage of the claim value and eliminate the claim from its reserve calculations, it also reduces its costs of administering the claim during a prolonged period of time. This results in an enhanced savings to the insurance company .

When you receive this offer, it will contain jargon such as morbidity and mortality valuation. This is the insurer’s internal calculation concerning the risk of you dying early before the full payment of the claim whether by sickness or accident. The insurer never discloses the mathematical basis for this calculation (as it is completely b.s. designed to favor the creation of a lower offer of settlement). Really, the insurer is just trying to convince you to take the offer on the table as soon as possible.

It will surprise some persons that more conscientious insurers will offer a small payment for a claimant to consult with an attorney concerning the settlement offer. It is even more surprising how many claimants do not take advantage of the “free” legal consultation and instead grab the settlement offer which is, in many cases, heavily and wrongly discounted.

In many other cases, the settlement offer is an unspoken warning: “If you don’t take this settlement, we will begin the process by which to deny your case.” No matter what, the insurer wants this claim off the books whether the easy way or the hard way.

For this reason as well, you need to get advice as soon as possible. When the claimant does not take the offer, then another review process will be undertaken so as to build evidence to use to buttress a disability benefits denial. This effort may include requesting an “independent” medical evaluation, functional capacity evaluation, neuropsychiatric assessment, personal interview, or some other step by which to acquire new information to be used against the claimant.

No matter what, you need to “look the gift horse in the mouth” as the insurer settlement offers are hiding ugly truths on too many occasions.
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