How are Car Accident Settlements Paid?
The fallout of a car accident can linger for months. Even after your bruises are faded and your broken bones have heal, the process is far from over. It’s possible to spend many months working towards a settlement with the insurance company. Whether you’ve been self-advocating or have had an attorney negotiating, the process can take longer than expected. Once you settle the claim, you wonder: how exactly are car accident settlements paid?
It would be nice to have a check handed to you immediately following an accident. In reality, that’s rarely how it works out. You will need to pay a number of parties involved out of your settlement money. Mechanics, doctors, therapists, and lawyers will all be eagerly awaiting your accident settlement.
For this reason, it’s best to wait until you’ve reached maximum medical improvement, or MMI, before accepting a settlement. Once you accept the settlement terms, you can never again pursue compensation for damages related to the accident. Statutes of limitations may prevent you from waiting too long. In many states, victims have two years from the accident date to pursue compensation. Fortunately, an attorney can help you understand when it’s time to settle a claim.
In some cases, a lawyer may advise you not to settle. When an insurance company fails to offer fair compensation for your damages, you may need to escalate to a lawsuit. Though rare, car accident lawsuits can help you recoup some costs. Costs associated with your crash when the insurance company refuses to meet your demands. In most cases, an experienced attorney will be able to negotiate a fair settlement without going to court.
Once you have settled the claim, it may take some time to actually get paid. Insurance companies handle hundreds of new claims each day. The bureaucratic red tape that comes with paying out settlements can be frustrating. For large settlements, you may see the lump sum broken up into several payments paid out over a few years. If you need the entire settlement upfront, be sure your lawyer negotiates this arrangement ahead of time.
Upon receipt of your settlement, your lawyer will deposit the money into an escrow account or trust. This is mandatory in most states. Once the check clears, your attorney will distribute the cash. You may want to have them send portions of your settlement to pay off any accident related debts. Fail to resolve these liens, and you could face expensive penalties.
Before you spend any of your settlement money, create a list of crash related outstanding debts to pay off. From your settlement, you’ll need to pay off any medical debt you owe because of the accident. Prioritize these payments; because without creating a plan, quickly your settlement money will be frittered away. Make out payments to any mechanics or body shops where you have outstanding debts.
Of course, you’ll also want to take care of your attorney. In many cases, their payment structure demands a certain percentage of your settlement. Get an itemized statement detailing the services you received. Your legal fees may include a number of costs. Costs associated with gathering medical evidence, paying expert witness fees, and paying deposition and court reporting costs. If you have questions or concerns about your legal fees, ask your attorney for clarification.
When creating this list of liens, it also helps to plan for tax season. While it would be nice to assume your settlement money is tax-free, that is unfortunately false. It is a requirement that you have paid taxes on the money you received for lost wages and emotional distress. On the other hand, you won’t owe taxes on medical expenses or for crash related pain and suffering. Work with an accountant to better understand your tax situation so the IRS doesn’t come knocking.
Patience is a virtue, but it can be tempting to wrap up such a stressful period. The settlement process isn’t as straightforward as the insurer simply dropping a check in the mail, though. Typically, insurance companies will pay out car accident settlements in about six weeks. Unfortunately, the process to reach that point can be complex. Understanding what to expect helps you’ll be better prepared to handle the claims process and get the settlement you deserve.
Start your accident claim on the right foot by finding an experienced car crash attorney in your area. Lawsuit Info Center has a host of useful resources and connections to local lawyers for victims to explore. To get started, check out our car accident settlement calculator or call 877-810-4067 now.