Insurance Claim Vs. Personal Injury Lawsuit: What Is the Difference?

By J. Silvio Mascolo, Esq.

Understanding the difference between an insurance claim and a personal injury lawsuit is often the first step after an accident. While the terms are often used interchangeably, their functions are not the same. An insurance claim is typically the first step toward seeking compensation after an injury, while a personal injury lawsuit involves filing a legal action when a claim cannot be resolved through settlement negotiations.

Serious accidents occur every day across the United States. According to the National Highway Traffic Safety Administration, 2.4 million people were injured in nationwide car accidents in 2023 alone. When injuries lead to medical bills, time off work, and long-term recovery periods, understanding how insurance claims and lawsuits work can make a significant difference in the outcome of your case.

At Rebenack Aronow & Mascolo L.L.P., our New Jersey personal injury lawyers help you weigh your options, navigate the claims process, and pursue legal action when necessary to protect your rights and financial recovery.

What is an Insurance Claim?

An insurance claim is a request for compensation submitted to an insurance company after you suffer injuries or other losses in an accident. Most personal injury cases begin with an insurance claim before any lawsuit is filed. Typically, the claims include:

• Filing the claim: You or your attorney reports the accident to either your own insurance company or the at-fault party’s insurer, depending on the situation.
• Documentation: Evidence such as medical records, accident reports, photos, and proof of lost wages is submitted to support your claim.
• Investigation: The insurer reviews the evidence, investigates the accident, and determines whether its policyholder is responsible.
• Negotiations: If the insurer accepts liability, negotiations begin to determine the value of your claim.
• Resolution: You may accept the settlement offer, continue negotiating, or reject it if it does not fairly compensate your losses.

Insurance claims typically seek compensation for losses such as medical expenses, lost income, and pain and suffering. If negotiations do not result in a fair settlement, filing a personal injury lawsuit may be the next step.

What Does a Personal Injury Lawsuit Involve? 

A personal injury lawsuit is a method of pursuing compensation when settlement negotiations with insurers fail, liability is disputed, or your damages exceed insurance coverage. The process generally involves:

• Filing a complaint: Your attorney files a lawsuit in civil court outlining how the accident occurred, who is responsible, and the damages you are seeking.
• Discovery: Both sides exchange evidence, request documents, and take depositions to better understand the facts of the case.
• Expert analysis: Medical professionals, accident reconstruction specialists, or financial experts may provide opinions about injuries, liability, and long-term damages.
• Negotiations: Many cases continue to be negotiated after lawsuits are filed and often resolve before trial.
• Trial: If a settlement cannot be reached, the case may proceed to trial, where a judge or jury determines liability and damages.

Lawsuits also seek compensation for medical bills, lost wages, and pain and suffering, but you can also pursue damages related to long-term losses, such as diminished quality of life, disability, and loss of support or companionship.

How Do I Determine Whether I Have a Personal Injury Case? 

Both insurance claims and personal injury lawsuits generally require proving the same key elements of negligence, which include:

• Injury: You must have documented physical or psychological injuries.
• Negligence: The injury must have been caused by another person’s negligent actions.
• Causation: The accident directly caused your injury.
• Damages: You suffered damages due to the injury, such as medical expenses, lost wages, or pain and suffering.

If an accident only caused property damage, such as vehicle damage without any injury, it generally does not qualify as a personal injury case.

Can I File an Insurance Claim and a Personal Injury Lawsuit?

In most situations, you file an insurance claim first and a personal injury lawsuit later if the claim does not result in a fair settlement. This can occur through several situations, such as: 

• Denied claim: Insurance may dispute liability or argue that your injuries are unrelated.
• Low settlement: The offer is less than the full value of your medical expenses, lost wages, and other damages.
• Damages exceed policy limit: Serious injuries often result in higher losses than available insurance coverage.
• Failed negotiations: If negotiations fail, filing a lawsuit may be necessary to pursue compensation through the courts.

Though insurance companies employ many tactics to avoid paying claims, many cases are still resolved through settlement after a lawsuit is filed and before reaching trial.

What New Jersey Laws Affect Insurance Claims and Lawsuits?

Several New Jersey laws affect how injury claims are handled and when you may file a personal injury lawsuit after an accident, such as:

• Personal Injury Protection (PIP): After an accident, your own PIP coverage in your auto insurance policy pays for medical expenses and other losses, regardless of who caused the crash.
• Verbal threshold (limitation on lawsuit): A policy option that, if you choose it, limits your ability to file a lawsuit unless your injury meets certain legal thresholds, such as permanent injury, disfigurement, or significant scarring.
• Comparative negligence: New Jersey’s modified comparative negligence allows you to recover compensation if you are less than 51% responsible for the accident.

Can I Still Sue After Accepting an Insurance Settlement? 

Once you accept a settlement, you typically also sign a release giving up the right to file a lawsuit related to the same accident. Insurance companies usually require this agreement before issuing payment, and the claim is considered fully resolved. Settlement agreements are legally binding, so it is crucial to understand the full extent of your injuries and damages before accepting any offer. 

Do I Need a Lawyer for an Insurance Claim?

You are not required to hire a lawyer to file an insurance claim. However, working with an experienced lawyer helps ensure your claim is properly handled and increases the likelihood of a better settlement. Insurance companies carefully evaluate claims and often dispute liability or the value of damages.

At RAM Law, our New Jersey personal injury lawyers can gather evidence supporting your claim, negotiate with insurers, and evaluate settlement offers. If negotiations fail, we can file a personal injury lawsuit and represent you in court.

Frequently Asked Questions About Insurance Claims vs. Personal Injury Lawsuits

1. Do I have to file an insurance claim before filing a personal injury lawsuit? You start with an insurance claim, but if it’s denied or the settlement offer is too low, you can file a lawsuit.
2. What damages can I recover in a personal injury lawsuit? Damages such as medical expenses, lost wages, pain and suffering, and more.
3. Which pays more: an insurance settlement or a personal injury lawsuit? Depending on the case, a lawsuit brings higher compensation if the insurance offer doesn’t reflect the full value of your damages.
4. What if the insurance offer does not cover all of my damages?  If the offer is too low, you may continue negotiating or pursue a personal injury lawsuit instead.
5. Which takes longer: an insurance claim or a personal injury lawsuit? Insurance claims are usually resolved faster. Lawsuits take longer due to court procedures and evidence gathering.

New Jersey Personal Injury Lawyers at Rebenack Aronow & Mascolo L.L.P. Fight for the Recovery You Deserve

If you have suffered an injury due to someone else’s negligence, our skilled New Jersey personal injury lawyers at Rebenack Aronow & Mascolo L.L.P. can help determine the next steps to get you on the road to recovery. Call 732-247-3600 or contact us online to schedule a free consultation. Located in New Brunswick, Somerville, and Manalapan, New Jersey, we serve clients in the surrounding areas.