Why Insurers Make Lowball Offers
Every dollar an insurance company doesn't pay you goes to their bottom line. Adjusters often have financial incentives to close claims cheaply. The insurer's first offer is almost never their best offer - it's a test to see if you'll accept less than you deserve.
Here's the uncomfortable truth: insurance companies study claim patterns and know that many policyholders accept the first offer without question. They budget for pushback on some claims, but bank on most people giving up easily.
❌ What Insurers Count On
- You need money fast
- You don't know your policy
- You trust their "expertise"
- You won't get legal help
- You'll accept to avoid hassle
✅ Your Advantages
- Policies favor ambiguity for you
- Bad faith laws provide remedies
- Documentation is powerful
- Regulators can intervene
- Attorneys work on contingency
Signs Your Offer is a Lowball
How do you know if an offer is fair? Here are red flags that suggest you're being shortchanged:
⚠ The Quick Offer
If you receive a settlement offer within days of filing - especially for a significant claim - be suspicious. Good claims require investigation. A fast offer often means the insurer is trying to close your claim before you understand its full value.
⚠ The Unexplained Number
The adjuster offers a round number with no breakdown of how they calculated it. Legitimate valuations come with detailed explanations showing how each component was evaluated.
⚠ Depreciation Abuse
For property claims, insurers often apply excessive depreciation, paying you "actual cash value" (replacement cost minus depreciation) when your policy may entitle you to full replacement cost.
⚠ Ignoring Part of Your Claim
The offer addresses only obvious damage but ignores related or hidden damage. For example, after water damage, the insurer pays for visible repairs but ignores potential mold remediation.
⚠ Using Their Own Estimators
The insurer's estimate comes from their preferred vendors or in-house estimators who consistently produce lower numbers. These "preferred" contractors may have financial relationships with the insurer.
⚠ Pressure to Settle Quickly
The adjuster creates artificial urgency: "This offer expires Friday" or "I can't guarantee this amount if you wait." This pressure tactic suggests they know the offer is low.
California's Fair Claims Settlement Practices Regulations (Cal. Code Regs. tit. 10, Section 2695.7(g)) require insurers to provide a written explanation of how they calculated their offer, including the basis for any depreciation. Failure to properly explain an offer can support a bad faith claim.
How to Fight a Lowball Offer
Don't Accept or Reject Immediately
Thank the adjuster for the offer and tell them you'll review it. This buys you time without creating hostility. Once you accept an offer, it's extremely difficult to get more money.
Request a Complete Written Breakdown
Ask for detailed documentation showing exactly how each component was valued. What depreciation method was used? What comparable properties or items did they reference? Where are the gaps?
Get Independent Estimates
Hire your own contractors, appraisers, or experts to assess your damages. These independent valuations often reveal significant undervaluations in the insurer's offer.
Document Everything You're Owed
Create a comprehensive damages spreadsheet. Include repair costs, replacement costs, temporary living expenses, lost income, and any other covered losses. Support each item with documentation.
Write a Detailed Counter-Demand
Submit a written counter-offer explaining why the insurer's valuation is wrong. Cite specific policy language, include your supporting documentation, and state the amount you believe you're owed.
Invoke Appraisal If Available
Many property insurance policies include an "appraisal clause" for valuation disputes. This involves each side hiring an appraiser, with an umpire deciding disagreements. It's often faster than litigation.
Consider Legal Representation
For significant claims, an attorney can send a demand letter citing bad faith and often gets results quickly. Many insurance attorneys work on contingency or offer affordable flat-rate demand letters.
Be cautious about signing any release documents. Insurers sometimes include language releasing them from all future claims, even for damage you haven't discovered yet. Read everything carefully before signing.
When Lowball Offers Become Bad Faith
A low offer isn't automatically bad faith - insurers are entitled to negotiate. However, an offer may cross into bad faith territory when:
- The offer has no reasonable basis in the policy or facts
- The insurer ignores evidence supporting a higher valuation
- The offer is designed to coerce acceptance through delay or pressure
- The insurer fails to explain how they calculated the offer
- The offer intentionally omits covered damages
- The insurer refuses to engage in good faith negotiation
In most states, insurers must pay the undisputed portion of a claim promptly, even while disputing the rest. If your claim is clearly worth at least $50,000 but may be worth $100,000, they should pay $50,000 now and negotiate the rest. Holding all funds hostage can be bad faith.
California specifically prohibits "attempting to settle a claim for less than the amount to which a reasonable person would believe he or she was entitled" (Cal. Ins. Code Section 790.03(h)(5)). Systematic undervaluation of claims can result in both regulatory penalties and bad faith damages.
Specific Claim Types and Lowball Tactics
Property Damage Claims
Common lowball tactics include using depreciation tables that don't reflect actual condition, ignoring code upgrade costs, using regional labor rates that don't match your area, and excluding matching costs for partial repairs.
Auto Total Loss Claims
Insurers often use questionable valuation services that cherry-pick comparable vehicles. They may ignore your car's actual condition, mileage, or special features. Get your own comparable vehicle listings and challenge unrealistic valuations.
Personal Injury Claims
Lowball tactics include disputing the severity of injuries, questioning medical necessity, using "independent" medical examiners who routinely minimize injuries, and applying aggressive formulas that undervalue pain and suffering.
Business Interruption Claims
Insurers may use narrow interpretations of "covered period," apply unreasonable expense calculations, or demand excessive documentation. They often underestimate how long reasonable restoration takes.
Related Guides
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