What it is
A demand letter is a structured document, typically 5 to 30 pages, that combines a narrative of the accident, a chronological summary of medical treatment, an itemized damages calculation, and a specific dollar demand. It is sent to the at-fault driver’s insurance adjuster (or to the defendant directly if uninsured) after the claimant reaches Maximum Medical Improvement and all evidence has been gathered. The letter includes attachments: medical records, billing summaries, lost-wage documentation, the police report, photos of vehicle damage and injuries, and any expert opinions. Demand letters are not legal pleadings — they are negotiation documents — but they are admissible at trial in some jurisdictions and shape the adjuster’s file evaluation. A well-drafted demand letter functions as the claimant’s opening offer; the adjuster’s counter is the starting point for the back-and-forth negotiation that follows.
How it works in practice
The standard sequence is: (1) finish treatment to MMI, (2) request all medical records and bills, (3) calculate economic damages (medical + lost wages), (4) calculate pain-and-suffering using the multiplier or per diem method, (5) draft the demand letter with the total settlement demand typically set 50–100% above the desired settlement to leave room for negotiation. The letter goes to the adjuster, who has 30 to 60 days under most state insurance regulations to respond. The adjuster will either accept (rare), counter-offer (most common), reject (uncommon), or ignore (triggers the option to file suit). Negotiation then proceeds by phone and email until both sides reach agreement or reach impasse. If impasse, the claimant’s next step is either mediation or filing suit. The demand letter dictates the entire negotiation range; setting it too low gives away leverage; setting it absurdly high signals inexperience and weakens credibility.
How Demand Letter affects your settlement
The demand letter is the single most important strategic document in a personal injury settlement, and the most common claimant mistake is sending one too early, too generic, or too low. A first demand that’s too low becomes the ceiling for the entire negotiation. Insurance adjusters use anchoring psychology: they internally peg your case value as some percentage of your stated demand. If you demand $30,000, you will likely settle for $15,000–$22,000; if you demand $90,000 for the same case (still defensible given multiplier math), you will likely settle for $40,000–$60,000. Both outcomes leave the adjuster having "cut" the demand by 30–50%, which is what their performance metrics reward. The takeaway: never let an adjuster set the anchor by responding to "what number would you accept?" before you have sent a written demand. Most experienced PI attorneys decline to discuss specific numbers until the formal demand goes out, precisely to control the anchor. Even unrepresented claimants benefit from drafting a written demand rather than negotiating verbally.
Primary sources
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Informational only and not legal advice. Settlement-dollar implications described here reflect typical patterns and may differ in any specific case. Confirm the analysis for your situation with a licensed attorney.