A private settlement is a way to resolve the consequences of the accident between the drivers without involving the insurers. The settlement may result in one party paying the other or both parties agreeing not to claim from each other. Parties in a motor accident who make a private settlement normally also agree not to make further legal claims against each other. This way of settlement between parties is in a written record and legally accepted.
Though both parties settle the accident by themselves without involving the insurers, it is still compulsory for parties in a private settlement to inform their insurers that both parties agree upon the settlement (the reasons are explained below).
When You Should Enter Into a Private Settlement?
If the motor accident resulted in minimal to no damage to your vehicle and more importantly does not involve bodily harm to any party involved, then it might be wiser for the parties to come into a private settlement.
One of the most important benefits of a private settlement, rather than claiming from insurers is to protect your No-Claims Discount (NCD). The NCD is a privilege for the insured in the situation that if you do not make any claims under your insurance policy for a period of a year or longer with the current insurer, you can get a discount for the premium that you have to pay to renew the policy. Consequently, losing one’s NCD by making an insurance claim eventually raises the cost of following motorbike insurance premiums.
When You Should Not Enter Into a Private Settlement?
Any party in a motorbike accident CANNOT opt for a private settlement when the accident involves or has resulted in:
- Death or bodily harm to any person, which may include a non-driving party (for example a pedestrian);
- Significant damage to any property, especially a government property; or
- A hit-and-run case.
How to make a private settlement
Step 1: Report to a workshop
Send your vehicle to any of the workshops listed on your certificate of insurance to assess the damage and get a written estimate of costs to repair the vehicle. This is the ordinary procedure to help the at-fault party be aware of how much they have to compensate for the other party.
Step 2: Fill in the form
Both parties have to fill in and sign a Private Settlement Form. This is a legal letter that binds two parties involving in an accident. This letter contains all the information about the accident, together with the terms and conditions of their agreement.
If it is a cash settlement, the recipient has to acknowledge receipt of the compensation.
Step 3. Inform Your Respective Insurers and Send Them A Copy of Your Private Settlement Form.
As mentioned before, Motor Framework requires a completed copy of your Private Settlement Form (with signatures of both parties) to your respective insurers. And you have to submit the form within 24 hours after you are involved in an accident.
This will protect you when the other party goes behind your back to file a claim or denies to pay the settled compensation amount.
We never plan for accidents, but at least the worst cases should be well prepared. You can request a copy of the private settlement letter from your insurer and have them kept in your motorbike box just in case. A driver would always choose to involve in a Private settlement when it makes economic sense.
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