Disclaimer – This article is for general information and education only. It is not financial or legal advice. Every claim and settlement is different, with unique facts, policy wording, and entitlements. If you have received a settlement offer from an insurer, seek tailored advice from a superannuation or insurance-claims lawyer before accepting.
When you finally hear back from your insurer after lodging a TPD, income protection, trauma, or other insurance claim, you may feel relief at seeing an offer of payment. But before you sign on the dotted line, you should ask:
👉 Is this the best offer I’m entitled to — or just the insurer’s first move?
The truth is that insurers often make initial settlement offers that are lower than what you may truly deserve. Accepting too quickly can leave you locked into a final agreement, unable to claim more later.
This guide explains:
- Why insurers make first offers.
- The risks of accepting without review.
- Key factors to consider before deciding.
- Real-life examples of under-settlement.
- A checklist of what to do before signing.
Why Do Insurers Make “First Offers”?
Insurers are businesses. Like any business, they aim to:
- Minimise payouts where possible.
- Resolve claims quickly and cheaply.
- Avoid long disputes or litigation.
First offers are often designed to:
- “Test” whether a claimant will accept without question.
- Save the insurer money if the claimant doesn’t challenge.
- Create finality — once you sign a release, you usually cannot claim more.
Key Factors to Consider Before Accepting
1. Does the Offer Reflect the Policy Entitlement?
- Check the policy wording. Does the amount align with your insured benefit (e.g. full TPD lump sum, ongoing income protection, trauma payout)?
- Sometimes insurers calculate benefits incorrectly or exclude add-ons (like indexation or super contributions).
2. Are There Deductions or Offsets?
- Insurers may reduce payouts by claiming “offsets” for workers’ comp, Centrelink, or other income.
- Some deductions are valid; others are not.
3. Is the Offer Conditional?
- Many offers come with a release form, preventing future claims for the same condition.
- If you later deteriorate, you may be unable to reopen the claim.
4. Has All Medical Evidence Been Considered?
- Insurers sometimes base offers only on their own IME (independent medical examiner) reports.
- Treating doctors’ opinions may not have been weighed properly.
5. Time Pressure and Urgency
- Insurers may give short deadlines to pressure you into accepting.
- This urgency tactic is common but not binding — you can request more time.
Case Studies
Case 1 – Undervalued TPD Offer
Michael received an offer of $120,000 for his TPD claim. His lawyer reviewed the policy and found his insured benefit was $180,000. After negotiation, the insurer paid the full amount.
Case 2 – Release Form Trap
Sarah accepted an early settlement for her income protection claim, signing a release. Six months later her condition worsened, but she was barred from further claims.
Case 3 – Trauma Claim Reassessment
Lisa’s trauma policy covered $250,000, but she was initially offered $80,000 under a “partial benefit.” Her solicitor argued her diagnosis met the full definition. She received the full $250,000.
Common Pitfalls
- Accepting without comparing to the PDS.
- Signing a release too quickly, blocking future claims.
- Not questioning deductions/offsets.
- Relying only on the insurer’s medical evidence.
- Being pressured by artificial deadlines.
Fast-Track Checklist: What to Do Before Accepting
| Step | Why It Matters | Action |
|---|---|---|
| 1. Read the offer letter carefully | Understand exactly what is being offered. | Note conditions, deductions, deadlines. |
| 2. Compare to your policy | Ensure it matches your insured benefit. | Review your PDS and schedule. |
| 3. Check for offsets | Some may be invalid or overstated. | Verify against records (Centrelink, workers’ comp). |
| 4. Review medical evidence | Insurers may cherry-pick reports. | Get updated reports from treating doctors. |
| 5. Seek professional advice | Protects against under-settlement. | Ask a super/insurance lawyer to review. |
FAQs
Is the first offer always low?
Not always, but insurers commonly offer less than full entitlement initially.
If I accept, can I change my mind later?
Usually no. Once you sign a release or accept payment, your rights are finalised.
Should I reject the offer outright?
Not immediately — first, compare the offer to your entitlement and get advice.
Do I have to respond by the insurer’s deadline?
You can request an extension. Don’t rush just because of pressure tactics.
Will getting legal advice delay my payout?
No — in many cases, legal advice helps secure the correct amount faster.
Key Takeaways
- The insurer’s first settlement offer may not reflect your true entitlement.
- Offers often include deductions, conditions, and releases that restrict future claims.
- Always compare the offer against your policy wording and insured amount.
- Never sign a release without independent legal advice.
- Professional review can mean the difference between being underpaid and receiving your full benefit.
Accepting the insurer’s first settlement offer without review can be a costly mistake. While it’s tempting to take the money and move on, many claimants later discover they settled for far less than their entitlement.
At TPD Claims Lawyers, we review insurer settlement offers every day. We identify underpayments, challenge unfair deductions, and negotiate for fair outcomes. If you have received an offer and are unsure whether to accept, contact us for a free, no-obligation assessment before making your decision.
Last updated: 3 September 2025