5 Things: Before Signing a Car Insurance Company's Release

If you're involved in a car accident, the at-fault driver's car insurance company may contact you to try and settle the claim. Your first reaction to a settlement offer may be relief. Now you'll get money to pay your medical bills and get your car fixed and back on the road. But you'll also have to sign a document called a "release" before the car insurance company sends you any money. Be sure to ask yourself a few key questions before you sign anything.

What Is a "Release of All Claims" Form In a Car Accident Case?

First things first. Sometimes called a "release of all claims" or a "waiver of rights," a release is a legal document in which an individual agrees to give up (or "release") certain legal rights. Whatever it's called, the purpose of the document is to end a legal matter (such as a civil lawsuit) and allow the parties to move on.

In the context of car accident claims or lawsuits, a person who signs a release gives up the right to sue certain individuals or entities over the accident that led to the claim. This means, if you sign a release from the other driver’s car insurance company, you'll be shielding the insurer and its driver from any further legal action arising from the accident. In return, you'll receive a settlement check.

When you receive the release from the car insurance company, don't sign it until you've considered the following five questions.

1. Do You Need Your Car Insurance Company's Permission Before Signing the Release?

Your own car insurance company may need to give its okay before you sign the release, under a legal concept called "subrogation," which is very important in car accident cases, especially underinsured motorist cases. Here’s how it works.

Imagine you’re involved in a car accident with another driver whose car insurance policy limits aren’t enough to fully compensate you for your losses. If you have underinsured motorist coverage, your car insurance company should make up the difference, up to your UIM limits. Your car insurance company will then use the subrogation provision in your car insurance policy to recover (or, more realistically, attempt to recover) the difference directly from the other driver.

Your car insurance company is using your legal right to go after the other driver to receive reimbursement for the underinsured coverage payment it just gave to you; this is how subrogation works. But if you sign a release without your car insurance company’s permission, the company’s ability to go after the other driver is now gone. In that situation, your insurance company may try to deny your underinsured motorist coverage claim, especially if the policy prohibits you from signing a release without consulting them first.

2. Do You Understand What You're Signing?

Legal documents can be intimidating, and you may feel like there’s no point in reading the release if you won’t be able to understand it. But you might understand more of the language than you might think, especially the most important terms— such as the settlement amount and the details of the settlement payment.

Don’t take the word of the car insurance company’s representative as to what the terms of the release are. Always check it over yourself to make sure there are no misunderstandings. This is another good reason to involve your own insurance company in the release process. They may be willing to review the document and identify any trouble spots. Other options include having a legal document review service look the release over, or running it past a personal injury lawyer. More on this later.

3. Does the Settlement Money Cover All Your Injuries and Losses?

Just because you feel fine and all your medical and repairs bills are fully covered by the settlement check, that doesn’t mean you've been fully compensated. Many injuries from car accidents aren’t discovered until some time after the crash. The last thing you want to do is agree to a settlement of $20,000 for medical bills when a month later it turns out you need another $10,000 in medical treatment for injuries that have only recently presented symptoms. Remember that once you sign the release, you can’t get anything else from the other driver or their insurance company.

You also want to make sure the settlement captures any income you've lost because of your injuries, your mental and physical pain and suffering, and all inconveniences (big and small) you've experienced because of the accident.

4. Should You Have an Attorney Review the Release?

Not only will an experienced attorney be able to explain exactly what the release says and answer any questions you may have, but there may be certain legal rights you aren’t aware of that will vanish if you sign the release. Your attorney will point these out for you.

For example, let’s say you confirmed with your doctor and mechanic that the car insurance company’s settlement amount is enough to pay for all your repairs and medical bills. But you may have valid claims for other losses that you may have overlooked or failed to consider, such as lost wages or pain and suffering. You won’t know for sure unless you have an attorney review the release and ask you the right questions. Learn more about when to hire a car accident attorney.

5. Could Anyone Else Be Responsible For the Accident?

This tends to be an issue when more than one other person or entity is involved in the accident. For instance, let’s say you have a release that only applies to a commercial truck driver that hit you. The settlement amount isn’t enough to fully compensate you, but you’re not sure if you should reject the release and file a lawsuit to try to recover the full amount. If it turns out that you have legal claims against the commercial truck driver’s employer and another individual driver, you might be more willing to sign the release.