Mar 11, 2025
Are Insurance Payouts Too Low? Understanding Claim Settlement Disputes & How to Get What You Deserve
Are Insurance Payouts Too Low? Understanding Claim Settlement Disputes & How to Get What You Deserve
You pay your insurance premiums expecting protection when you need it most. But when a claim is filed, some policyholders face the unexpected frustration of a settlement offer that seems far too low. Whether it’s a car accident repair, roof damage from a storm, or another loss, getting an insurance payout that doesn’t cover your expenses can leave you feeling stuck.
This issue is among the top consumer complaints about home and auto insurance. While insurance companies follow specific guidelines when determining claim payouts, there are ways to ensure you’re getting a fair settlement.
As part of our Tuesday and Thursday series, we’re breaking down the biggest insurance frustrations and how to navigate them like a pro. Today, we’re tackling the problem of low claim settlements. Why do they happen, what can you do if you receive one, and how can working with the right insurance agent help prevent these situations in the first place?
Why Are Some Insurance Settlement Offers So Low?
Insurers aren’t out to shortchange you; their job is to assess risk and minimize losses. Which sometimes means initial settlement offers don’t fully cover what policyholders expect. Here’s why:
1. Depreciation & Policy Limits
Many policies pay out actual cash value (ACV) rather than replacement cost. This means the insurer accounts for depreciation. So if your 10-year-old roof is damaged, the payout might reflect its current value, not what it costs to replace it.
The Fix: When setting up coverage, ask about a Replacement Cost Value (RCV) policy to avoid depreciation issues.
2. Incomplete or Insufficient Estimates
The insurance company may rely on its own repair estimates, which sometimes don’t match the real-world cost of repairs. This is especially common with auto repairs and home damage, where local labor and material costs fluctuate.
The Fix: Get your own repair estimates and submit them for reconsideration. If there’s a major discrepancy, your insurance agent can help dispute it.
3. Policy Exclusions & Coverage Gaps
Certain damages or losses may not be covered as you expected. For example, flood damage isn’t covered under a standard homeowners policy, and aftermarket modifications may not be covered under auto policies unless specified.
The Fix: Review your policy with an agent before disaster strikes to ensure you’re fully covered.
4. Insurance Company Algorithms & Payout Formulas
Insurers use automated systems and industry databases to calculate claim payouts, sometimes leading to lowball offers that don’t fully reflect unique circumstances.
The Fix: If you feel your payout is unfair, you can negotiate. Your agent can assist with this process.
What to Do If Your Claim Settlement Is Too Low
If you receive a claim settlement that doesn’t cover your expenses, you don’t have to accept it immediately. Here’s how to handle it:
1. Review the Offer & Your Policy Carefully
Look at the breakdown of the offer compared to your policy coverage. Does depreciation play a role? Were certain costs excluded? Your insurance agent can help translate the details.
2. Gather Independent Estimates
If the insurer’s estimate seems low, get your own quotes. Whether it’s from a contractor for home repairs or a body shop for a car accident, having independent estimates strengthens your case.
3. Request an Explanation in Writing
Ask the insurance company to explain how they calculated the settlement. This helps you spot any inconsistencies or areas where additional negotiation is needed.
4. Work with Your Insurance Agent
A good insurance agent is your advocate. They can communicate directly with the claims adjuster, help negotiate a fair payout, and ensure nothing gets overlooked.
5. Negotiate (Yes, It’s Possible!)
Many people assume they must take the first offer, but claim settlements can often be renegotiated. Presenting alternative estimates and documentation can help increase your payout.
6. Consider a Public Adjuster for Large Claims
If your claim involves significant damage or a complex dispute, a public adjuster is a licensed professional representing policyholders, not insurance companies. They can help maximize your settlement.
7. Escalate if Necessary
If all else fails, you can file a formal complaint with your state’s insurance department or consider legal options. However, in most cases, a well-documented appeal and agent support can resolve disputes before they reach this stage.
Find Your State’s Insurance Regulator Here
How an Insurance Agent Helps You Get a Fair Settlement
Many claim disputes come down to misunderstandings or lack of information. A trusted insurance agent can help clarify coverage, advocate for a fair payout, and ensure your policy is set up to protect you properly.
Here’s how your agent makes a difference:
- Before a Claim: They help you understand your coverage, ensuring you have the right policy to avoid surprises if you ever need to file a claim.
- During a Claim: They assist with documentation, claim filing, and communication with adjusters, reducing stress.
- After a Claim: If you receive a low settlement offer, they help you challenge it and negotiate for a fair payout.
A strong agent-client relationship means you don’t have to handle the claim process alone—you have someone in your corner making sure you get what you’re owed.
Protect Yourself Before You Ever Need to File a Claim
The best way to avoid a low settlement is to ensure your coverage is set up properly in the first place. Many policyholders only realize their coverage isn’t enough after a loss happens—but you don’t have to be one of them.
Let’s review your insurance policy together. I’ll help you make sure:
· You have the right level of coverage for your home, car, or business.
· You understand what’s covered and what’s not, so there are no surprises.
· You have a trusted advocate on your side if a claim ever happens.
Click [here] to schedule a free policy review, or give me a call! There is no pressure—just expert advice to protect you.
Making Insurance Work for You
Claim settlements are meant to help you recover, not leave you struggling to cover the difference. If you ever feel like your payout is too low, know your rights, push back when necessary, and work with an experienced agent who has your back.
We’re just getting started in this series. Check back every Tuesday and Thursday as we break down common insurance frustrations and how to navigate them clearly and confidently!