Five Things to Know About Car Accident Settlement Agreements

Five Things to Know About Car Accident Settlement Agreements

After a car accident, an insurance adjuster may approach you to discuss a settlement of your personal injury claim.

The adjuster may make a settlement offer that sounds appealing.

However, to receive the money for your injury claim, you are required to sign a settlement agreement.

What is a Settlement Agreement?

settlement agreement

A settlement is an agreement between two parties that settles a dispute. In personal injury claims, a settlement generally results in payment of compensation to the accident victim. The amount of compensation paid for damages depends on the facts of the case.

The insurance company prepares a car accident settlement agreement outlining the details of your settlement. A representative from the company explains that you must sign the agreement before the company can pay your claim. The agreement is lengthy and contains numerous clauses and legal terminology about liability, fault, claims, negligence, third parties, etc.

Before you settle your injury claim and sign an agreement that the insurance company prepared, there are some things that you should know about settlement agreements and your legal rights. 

Five Things to Know Before You Sign a Car Accident Settlement Agreement

Do not sign a settlement agreement for your car accident claim until you consider these five important issues:

1.  You Are Releasing All Claims and Parties From Further Liability 

A car accident settlement agreement is final. The agreement ends your claim against the insurance company and the driver who caused your accident. And, you are also releasing other parties when you sign the agreement.

Most agreements prepared by the insurance company include clauses that release all parties from any further liability for claims. The clause applies to parties that are known and unknown. Therefore, if you have a claim against another party, you could be giving up your right to pursue that claim if you sign the settlement agreement.


For example, suppose that your car accident injuries were worse because of a defective airbag or seat belt. You could have a product liability claim against the car manufacturer or other party. However, if you sign the settlement agreement, you could give up your right to pursue that claim.

The car accident settlement agreement also releases all parties from further liability for your claim. Therefore, if you discover additional injuries or damages, you cannot file a personal injury lawsuit or demand more money for your claim. That applies even though you did not know about the injuries or damages when you signed the settlement agreement.

2.  Do You Know the Value of Your Car Accident Claim?

The insurance company has no incentive to tell you the actual value of your car accident claim. It is in the insurance company’s best interest if you do not know the value of your claim. If you do not know how much your car accident claim is worth, you do not know if the insurance company is undervaluing your damages.

Before you sign a settlement agreement, you should understand the types of damages available in a car accident claim. You also need to understand how much each of those damages is worth.

In most car accident cases, the accident victims are entitled to compensation for their economic and non-economic damages. Economic damages cover your financial losses caused by the car crash. They may include your loss of income, travel expenses, medications, medical treatment, personal care, and other out-of-pocket expenses.

However, you can also receive compensation for non-economic damages. These damages include the pain, suffering, discomfort, and inconvenience caused by the car wreck. 

You may also receive compensation for any permanent disabilities, impairments, disfigurement, or scarring. The company should compensate you for the loss of enjoyment of life or quality of life caused by the car accident injuries.

Calculating damages for a car accident claim can be challenging. There is no standard formula for placing a value on pain and suffering damages. A multiplier method may be used, but knowing what factor to use to calculate the value can be difficult if you are not familiar with personal injury laws and settlements. 

3.  Is the Agreement in Your Best Interest or the Insurance Company’s Best Interest? 

The insurance company will always draft the car accident settlement agreement in its favor. It is going to offer the lowest amount it believes you will accept to settle your claim. It will also put terms and conditions in the settlement agreement that favor the company. 

The insurance claims adjuster and other individuals working for the company do not represent you. They are not working on getting you the best settlement, nor are they looking out for your best interests. 

Have you completed medical treatment? If not, do not sign a settlement agreement. You could be entitled to additional compensation once your doctor completes treatment. 

The company may be trying to get you to enter a binding agreement before you realize the extent of your injuries or talk to a personal injury lawyer. 

It is important to understand that you are representing yourself if you settle your claim without an attorney. There is no one looking out for your best interests. Unless you are sure that the settlement agreement is in your best interests, it may be wise to seek legal advice before signing a legally binding contract.

4.  Have You Reviewed All Your Options?

car accident

You are not required to settle your car accident claim. The insurance company may aggressively pressure you to enter a settlement agreement because it wants to avoid a lawsuit. However, filing a personal injury lawsuit might be in your best interest.

A jury trial has risks. You cannot predict what a jury might do in any case. 

However, you should consider why the insurance company is aggressively pressuring you to settle your claim. Is the company trying to avoid further liability for your car accident claim? 

If you are unsure whether you want to go through the expense of a trial, you may want to discuss mediation or arbitration options with a lawyer. These options settle a case outside of court and might be a good alternative when you want to negotiate a higher settlement amount for your claim. 

Do not wait too long to explore your options. Your time to file a personal injury lawsuit is limited. You give up your legal right to file a lawsuit if you miss the deadline outlined in the Texas statute of limitations.

5.  Do You Know the Law Governing Insurance Claims?

The Texas Insurance Code governs insurance companies within Texas. They have an obligation and a duty to investigate insurance claims promptly and fairly. There are laws against the use of unfair or deceptive practices when handling car insurance claims. 

Examples of acts that might be considered bad faith include:

  • Failing to investigate your insurance claim
  • Delaying payment of claims without a valid reason
  • Intentionally misleading you about your legal rights or settlement options
  • Requiring unnecessary documentation and information 
  • Making threatening statements
  • Refusing reasonable requests for documentation
  • Ignoring a claim or lack of communication
  • Intentionally undervaluing a claim to avoid liability
  • Altering the terms of an insurance policy

If the insurance company engages in unfair claim settlement practices, it could be guilty of bad faith insurance practices. If the insurance company violated any laws, you could be entitled to compensation for a bad faith insurance claim. 

Call Our Fort Worth Car Accident Attorney for a Free Consultation

Learn about your legal rights and how we can help you fight for fair compensation for a car accident claim during a free consultation with a Fort Worth personal injury lawyer at Stephens Law Firm, PLLC. So contact our personal injury law office online or call (817) 420-7000 to set up your appointment. You have the right to legal counsel before you sign a car accident settlement agreement. Make sure that you are doing what is in your best interest.