Scroll Top

search-icon
    drop-arrow

    Buyout Settlement Clause

    Introduction

    A buyout settlement clause is a provision in an insurance policy that allows the insured to reject a proposed claim settlement made by the insurance company and the claimant.

    The aim of an insurance company is to defend the interests of the person taking the insurance policy, against third party claimants. If a claim is filed against the insured party, the insurance company collects all information related to the claim, as well as handles the legal expenses of defending the policyholder in a court of law. The insurance company, then, makes a settlement to the claimant, which the insured may not agree with and can hence choose to reject the claim.

    Understanding Buyout Settlement Clause

    Most often, insurance companies settle amounts with third-party claimants without taking matters into court. However, in some cases, the insured persons do not agree with the amount or terms of the settlement.

    Under the buyout settlement clause, the insurer settles the amount with the insured, and therefore “buys out” the claim. It is done to remove the insurer from any further obligation for defending claims once they have been rejected by the insured.

    The insured may still proceed with the case, but it will be thereafter done at their own risk. The costs could exceed the buyout settlement where the insured pays for it out of their own pocket or could be less than it, where the insured can keep the difference.

    Why is a Buyout Settlement Clause Needed?

    Many policyholders prefer to settle cases quickly rather than undertake prolonged negotiations, which could possibly damage the business’ reputation in addition to excessive legal fees.

    However, in some cases, the policyholder may feel that the case lacks basis and would prefer to not settle the claim on the terms of the claimant. Hence, the insurance company, in its need to close the claim and not expend any more money on legal costs, has a buyout settlement clause in its contract.

    Popular Topics

    Latest Articles

    Clear offers taxation & financial solutions to individuals, businesses, organizations & chartered accountants in India. Clear serves 1.5+ Million happy customers, 20000+ CAs & tax experts & 10000+ businesses across India.

    Efiling Income Tax Returns(ITR) is made easy with Clear platform. Just upload your form 16, claim your deductions and get your acknowledgment number online. You can efile income tax return on your income from salary, house property, capital gains, business & profession and income from other sources. Further you can also file TDS returns, generate Form-16, use our Tax Calculator software, claim HRA, check refund status and generate rent receipts for Income Tax Filing.

    CAs, experts and businesses can get GST ready with Clear GST software & certification course. Our GST Software helps CAs, tax experts & business to manage returns & invoices in an easy manner. Our Goods & Services Tax course includes tutorial videos, guides and expert assistance to help you in mastering Goods and Services Tax. Clear can also help you in getting your business registered for Goods & Services Tax Law.

    Save taxes with Clear by investing in tax saving mutual funds (ELSS) online. Our experts suggest the best funds and you can get high returns by investing directly or through SIP. Download Black by ClearTax App to file returns from your mobile phone.

    Cleartax is a product by Defmacro Software Pvt. Ltd.

    Company PolicyTerms of use

    ISO

    ISO 27001

    Data Center

    SSL

    SSL Certified Site

    128-bit encryption