If you’re planning on filing a personal injury claim after an accident, it helps to work with an experienced attorney. A lawyer understands the ins and outs of the legal system and this can make the claim process go a little more smoothly. 

Unfortunately, most accident victims can’t afford attorney costs. Since you’re already dealing with unexpected costs stemming from the accident, chances are, you simply can’t afford legal representation. This is when it pays to be familiar with the benefits of a contingency fee agreement. If you’re not familiar with contingency fees, here’s a look at what you should know about the payment structure.

What Are Contingency Fees?

Attorneys can offer clients a choice of payment structures. You can pay a flat, upfront fee that covers all the work an attorney puts into your case. Hourly rates are another option. You pay a set fee for each hour the lawyer works on your personal injury claim.

Even though these payment structures are different, both typically require you to pay a percentage upfront. If you’re dealing with expenses like medical costs, coming up with an upfront payment can be impossible, but this doesn’t mean you can’t retain legal representation. Personal injury attorneys are allowed to charge clients a contingency fee.

So, what are contingency fees? This is a fee structure that only personal injury attorneys are legally allowed to use. Contingency fees mean you’re not paying attorney costs upfront. Instead, you’re agreeing to pay your attorney a percentage of your insurance settlement. 

If your attorney doesn’t win your claim, you’re not on the hook for lawyer fees. However, if your claim is successful, your attorney deducts their contingency fees from your settlement check. You receive a check for the rest.

If you’re wondering why only personal injury attorneys are allowed to work on a contingency fee basis, the answer is pretty simple. Only personal injury attorneys are working to secure financial compensation for their clients. If the goal of a case isn’t to recover compensation, an attorney won’t be paid.

How Much Are Contingency Fees?

This is a question you want to ask a prospective attorney before signing a contingency fee agreement. You want to know what percentage of your potential settlement is going to your attorney. This can help ensure you still receive enough compensation to cover your losses like medical expenses and property repair costs.

While personal injury attorneys have plenty of leeway when it comes to setting contingency fees, most lawyers charge between 33% to 50%. The higher contingency fee percentages typically apply to personal injury claims that are requesting punitive damages. If you’re not sure what punitive damages are, these are only awarded by a judge or jury in civil court.

Punitive damage awards can be substantial, even if your state has a cap on amounts. Since your personal injury claim is also headed for trial in civil court, your attorney has a little more work to do compared to a relatively simple insurance claim. The combination of a potentially larger settlement and work on a civil case can result in an attorney charging higher contingency fees.

Contingency Fees May Not Cover Everything

Something you don’t want to forget to discuss with an attorney is what contingency fees cover. You don’t want to settle a personal injury claim only to find out you owe your attorney more than a 33% contingency fee.

What can be considered extra? The list can be extensive and not everything may apply to your personal injury claim. Some items that may result in charges outside your contingency fee agreement can include expert testimony. 

If your claim turns into a lawsuit, you may be responsible for covering court costs, and this can include filing fees and they can quickly add up. Even obtaining copies of your accident report and medical records can result in additional charges.

Before you enter into a contingency fee agreement, find out exactly what it covers—this way, you’re not left with unexpected costs that can eat away at your settlement award.

Benefits of a Contingency Fee Agreement

Now that you’re a little more familiar with contingency fees, it’s time to look at the benefits. This can make it easier to decide if this is the right payment structure for your personal injury claim.

Low-Risk Legal Representation

Since you’re not forking over money to hire an attorney, there’s no financial risk for you. Instead, the attorney assumes all of the risk. Your personal injury lawyer is only paid if they win your claim. This alone may be enough to persuade you to hire an attorney. All you’re risking is a denial letter from the insurance company.

No Upfront Costs

We keep mentioning there aren’t any upfront costs with contingency fees, which is a benefit of the payment structure that shouldn’t be overlooked. 

Hiring an attorney is expensive, even if the lawyer is fresh out of law school. Chances are, you simply can’t afford to pay upfront or hourly fees. With contingency fees, you have legal representation without having to come up with an initial payment.

Motivate Your Attorney

Since your attorney is only paid if you win your personal injury claim, contingency fees can be a great motivator. 

While you hope attorneys always put effort into the cases they take on, sometimes lawyers need a little motivation. Your attorney is more likely to focus on successfully moving your claim along through the legal process, this way everyone is paid in a relatively timely manner.

Potential Downsides of Contingency Fees

Contingency fees can also have a potential downside. Some less reputable attorneys may only take cases that promise large settlement amounts. Your case may also get pushed to the back if another claim comes in with a higher value.

Another potential downside can be the fees you end up owing your attorney. Sometimes, the associated costs like expert testimony can take up the majority of your settlement. This is something to consider before agreeing to contingency fees.

You Can Afford Legal Representation

Getting legal representation for your personal injury claim may be more affordable than you think, thanks to contingency fee arrangements. These fees allow almost anyone to hire an attorney, as payment is only required if you win your case. 

However, it’s important to fully understand what your contingency fees cover to avoid any unexpected costs after settling your claim. Clear communication with your attorney about fees will help ensure you’re not caught off guard by additional expenses.