As public adjusters, we often have clients concerned with the term settlement during their insurance claims. Throughout the claims process, insurance companies should send a notice of payment letter any time a payment is issued. Often these letters will either say “Settlement Notice” at the top of the page or have a line within that has a settlement amount listed.
The most common misconception that insureds have is that the letter and payment mean that the insurance claim is settled and nothing further can happen. This is not true. Estimates are almost always subject to change as additional repairs may be needed or items were not included that should have been. When there are additional repairs needed, this is called a supplement.
The other common misconception is that by cashing the payment, you agree to settle the claim. Again, this is not true. The insurance company has made a payment that they agree to and have settled on the scope of work and the amount of payment at that time. The payment is an undisputed amount meaning both you and the insurance company agree you are owed at LEAST that much.
In these situations, the term settlement is essentially used to reference the specific payment that is being issued. The same will occur when there is a revised estimate or inventory.
A true settlement on a claim where the claim is closed will most of the time have an attorney involved. Attorneys get involved with insurance claims because of bad faith. At that point, the attorney will negotiate a settlement amount with the insurance company to finalize the claim. That being said, if an insurance company requests you to sign a “full release of claim” for payment, that would be a release, and you should always contact an attorney for advice.
If you receive a payment from the insurance company and you are concerned that you will not be able to repair your home with that amount, call your public adjuster. They will work for you with the insurance company to ensure you are paid properly and that any payment and settlement letter is accurate.