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What is a Claim Settlement?

Mary McMahon
Updated: May 16, 2024

A claim settlement is an agreement between two or more parties to settle a legal claim with payment and other terms. Claim settlements can come up in a number of legal contexts. It is important to be aware that settling a claim usually also eliminates the right to make future claims about the legal matter in the future. If people are not satisfied with the terms of a settlement, they should renegotiate, rather than accepting and resolving to pursue the matter further at a later date.

One of the most common forms of claim settlement involves an insurance claim. When people make claims against an insurance policy, the company reviews the claim, determines if it is covered, and offers a settlement to pay the claim. Sometimes this is a straightforward process, as when someone with complete prescription coverage has prescriptions paid for by the insurance company. In other cases, people may dispute the circumstances or amount of the claim and the case may end up in court.

Legal cases where people are filing for civil damages are resolved with claim settlements as well. Sometimes the defendant may offer to settle before the case goes to court, a situation commonly seen when the defendant believes that going to court could result in a costly award or could create negative publicity. In other instances, a settlement is reached during court proceedings, with a judge or jury awarding damages to the plaintiff and the defendant being ordered to pay them.

The terms of a claim settlement can vary and both parties are usually required to abide by certain terms. The party paying out is required to pay out in full within a set time limit. The party receiving a payment may be required to waive future claims about the matter and to indicate acceptance of the settlement. Other terms may be attached to the agreement, depending on the case.

People who are unfamiliar with the legal system should be aware that a claim settlement can be used abusively. Before signing documents associated with a settlement, the documents should be carefully reviewed and if the terms are not understandable, an attorney should be asked for clarification. People may be encouraged to settle out of court or to settle immediately and in the process they may give up future legal rights and end up with less money than they are entitled to. Pro bono legal clinics can provide advice to people involved in a claim settlement who cannot afford to consult an attorney.

MyLawQuestions is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Mary McMahon
By Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a MyLawQuestions researcher and writer. Mary has a liberal arts degree from Goddard College and spends her free time reading, cooking, and exploring the great outdoors.

Discussion Comments
By Fa5t3r — On Jan 18, 2013

My friend worked as an insurance settlement agent for a while but she couldn't stand the job. She said it was just miserable having to hear about people in trouble all day long, particularly when she worked with the accident claims.

It was really nice when she was able to help them, but they were under strict orders to ensure that they followed the rules, and so she wasn't always able to help. And, of course, whenever that happened it wasn't the company that was blamed, it was her, personally.

I think if you're good at not taking things like that badly, it's a fairly good job, but it's not one I'd like to do.

By croydon — On Jan 18, 2013

@pastanaga - Even if you do it for the right reasons, you can be disappointed. Often the person or organization you're going up against has a much better law team and the real world doesn't exactly work like the movies.

Usually, the person with the best lawyer is going to win. So, fight if you can or must, but don't pour your life savings into it or anything.

By pastanaga — On Jan 17, 2013

Just in case anyone is reading this, hoping to make a lot of money out of suing someone, you should really try to make sure that you're doing the right thing first. We only ever hear about the massive claim settlements and hardly ever about the failed ones, or the ones that don't cover legal expenses, or the ones that drag on for so long they weren't worth the time and trouble.

My father once had a dentist break off a piece of dental drill in his jaw and then just cover it over without removing it. He got a massive infection and almost died. When he decided to sue the dentist, he did it because the man was dangerous and needed to be dealt to. And even with what seems like a clear-cut case, dad only ever got a few tens of thousands of dollars, hardly worth the time spent on the case.

So I'm not saying don't try for an injury claim settlement, just try to do it for the right reasons, so you won't be disappointed.

Mary McMahon
Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a...

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