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How Do Car Accident Settlements Work?

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Settling a car accident dispute is an alternative to going to court and having a jury decide your case. With a settlement, each side agrees on how much it will cost to settle the dispute. Reaching a settlement is often a faster way to finally get the compensation you need following a wreck. Khan Law Firm has negotiated countless settlements, and our lawyers take a deeper dive into what you need to know.


Most settlements require some upfront negotiation. Typically, the accident victim makes a demand on the driver who hurt him or on that driver’s insurance company. They then decide whether to agree to the demand or make a counteroffer.

Negotiation can require considerable back and forth. There might be factual disagreements keeping the two sides apart, such as how to divide fault for the wreck or the severity of the victim’s injuries. Typically, though, the dispute is about money.


Once a settlement agreement is reached, both sides should memorialize it in a settlement agreement. Maybe a handshake was good enough 50 years ago, but settlements are written and signed by each side.

Ideally, you should have an attorney draft a settlement. One key component is breaking out the compensation and identifying how much goes specifically to medical care, lost income, property damage, or pain and suffering. If you were to get divorced, for example, then you would benefit from itemizing the compensation in this way, since money for pain and suffering is typically a separate property you can leave the marriage with.

Method of Payment

You can take a car accident settlement as a lump sum or have regular payments, such as annual payments for 10-15 years. We can structure settlements in different ways, depending on your goals. If a child was injured, then any settlement will probably get deposited into a trust or other safe financial vehicle so that the value is preserved until your child reaches adulthood.

Release of Liability

What incentive does the at-fault driver have to reach a settlement? That’s easy to answer: the release. In exchange for paying you money, the other driver wants you to release him or her from further liability related to this accident. Without signing a release, it is virtually impossible to get a settlement.

The release is an agreement that will stand up in court. If you tried to sue in the future after signing a release, the defendant would show it to the judge and the judge will dismiss the lawsuit.

Your Check

Once everything is signed, the defendant’s insurer should cut a check for your attorney, who will deduct his or her fee. There might be other deductions, such as a lien on your settlement. The rest then will be sent to you. Depending on the amount you receive, you might want to consult a financial planner.

Contact Us to Learn More

If you were involved in a crash, you should certainly meet with a lawyer at Khan Law Firm to discuss a possible settlement. No one should negotiate on their own because it is too easy to make a costly mistake. Call us today to schedule a meeting.

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