When you purchase an insurance policy, the company that sells it to you has an obligation to fulfill the promises made within the policy regarding coverage, just as you have an obligation to pay your premium in a timely manner.
Unfortunately, insurance companies are often for-profit businesses that want to do everything in their power to limit their financial obligations, including valid obligations to their clients. If you find yourself dealing with an insurance settlement offer that is far below the financial impact of the situation leading to the claim, you may be dealing with a bad faith insurance situation.
Low settlement offers are a way to avoid responsibility
One of the reasons that an insurance settlement can seem so tempting is that the offer usually involves a lump-sum payment. When you’re dealing with extensive medical costs or property damage, knowing there will be money coming in to offset those expenses can give you peace of mind.
Insurance companies can take advantage of the financial hardship that often accompanies a large claim by offering a settlement that they know will not reasonably offset the damage a policyholder has suffered. They do this because the settlement agreement will typically protect them from future financial liability or claims.
Once you accept the settlement, even if you incur tens of thousands of more dollars worth of expenses, the insurance company will likely refuse to help you. If you have either received inappropriately low settlement offers or have had to deal with a denial of a legitimate claim that you believe was in bad faith, you may need to take legal action against the insurance company to force their compliance with the terms of the policy you paid for.