There are options other than going to court when disagreements arise with your insurance company. The two steps are mediation, and then the more serious arbitration.There are two main differences between mediation and arbitration.Arbitration is more expensive than mediation. Rulings in arbitration are binding, while decisions in mediation are only advisory.The Insurance Information Institute offers the following suggestions for resolving a dispute with your insurance company before going through mediation or arbitration:

• Let your agent know you are unhappy.
  If your agent is unable to solve your problem, get the name and phone number of the head of the insurer's claims department. Your insurance company might have a consumer complaint department that might be helpful.

• Be prepared to support your case.
  Send documents and a letter to your insurance company, explaining why you are not satisfied. Make sure you have the figures and documentation to back up your argument.

• Review your auto insurance policy.
  Most companies offer either arbitration or appraisal services to help settle differences and disputes. Your insurance policy will explain these options.

• Contact your state’s insurance department.
  If you have followed your insurance company’s rules for resolving a dispute, and you remain dissatisfied, your state’s insurance department might be able to help.

• Call the National Insurance Consumer Helpline.
  If after hearing from your insurance company's claims executive you still feel your claim hasn't been handled properly, call 800-942-4242. This is a toll-free consumer information telephone service sponsored by the insurance industry. Trained personnel and licensed agents are available to assist consumers who have complaints. The Helpline operates Monday through Friday, 8:00 a.m. - 8:00 p.m. Eastern Time.

• Contact an arbitrator to hear your case.
  An independent arbitrator with experience in insurance matters can decide if the settlement you were offered is fair. Your insurance company might suggest an arbitrator, or you can get your own from the American Arbitration Association at 212-484-4000 or at http://www.adr.org.

• Consult an attorney.
  If you feel the need for legal assistance, consult an attorney who specializes in auto insurance. Each state’s bar association offers a free legal referral service, which will give you names of qualified candidates. Attorneys work either on an hourly rate or on a contingency basis, depending on the type of case. Get the attorney's fee structure in writing. You can remain current on the progress of your claim by insisting you receive copies from your attorney of all correspondence. Your attorney must have your agreement before committing to any settlement. You may consult an attorney as part of any mediation or arbitration, and you may have an attorney represent you at arbitration hearings.

Mediation, the first step

When you can’t resolve a dispute with your insurance company, mediation can help. The mediator acts as a neutral party to assist both sides in reaching a compromise. The mediator does not have the authority to make a binding decision or issue an award to either party. The mediator only recommends a solution.

Mediation is a good first step to take if both parties are willing to participate, because it can negate the need for further expense on either side.

In order to mediate a claim, the first thing you should do is check the language in your auto insurance policy. Most policies spell out who will mediate or arbitrate a claim. You would submit a Demand for Arbitration form to whoever is listed in your policy.

Demand for Arbitration forms are available from your state’s department of insurance, or you can print out a copy of a demand form from the  American Arbitration Association’s web site. On the Demand for Arbitration form, you can specify whether you want mediation or arbitration. The party who oversees the mediation should provide both sides with a list of qualified mediators, and both sides can exclude names from that list. Usually, the party the insurance company has chosen to oversee the mediation process will make the final selection of a mediator.

You can get legal advice from your lawyer about the mediation process. Your lawyer may also attend any mediation sessions.

After mediation, it’s arbitration

Both parties must agree to arbitration, just as in mediation. There are more stringent rules in arbitration; however, since the final decisions are binding.

Taking your lawyer along in arbitration is often a worthwhile expense.

If your lawyer is representing you at an arbitration hearing, you must inform your insurance company ahead of time. The insurer also has to let you know if a lawyer will represent it at the hearing.

Similar to court proceedings, each side is allowed to present evidence supporting its claims. Each side may introduce witnesses, who must also submit to questioning by the other party as well as by the arbitrator. The arbitrator is authorized to subpoena witnesses or documents, that might help clarify the case. The insurer or the policyholder can request a subpoena.

The arbitrator may also issue a subpoena to gather vital information for the case, even if neither side requests it. In arbitration cases, a deadline is established by which a decision and/or award must be made. If the time limit is not spelled out in your insurance policy, the arbitrator will establish the deadline. The only way that deadline can be extended is if all parties agree.

The arbitrator is allowed to determine whether you, as the insured, have a right to receive any damages under your policy and, if so, how much. The award cannot exceed the applicable policy limits. If you and the insurance company reach an agreement on your own during the process, the arbitrator can enter your agreement as the decision.

What happens next?

For example, if you dispute the amount your insurance company has determined as the replacement value of your car after an accident in which the vehicle is totaled, there are some things to keep in mind. Insurance companies do not use the Kelley Blue Book or the National Automobile Dealers Association Guide to determine a car's value.

Insurers have specialized software to determine what it would cost to replace your car, with its current mileage and in its pre-accident condition, at a dealership in your area. That might mean the insurance company gets a dealer's "take" price — the lowest price the dealer would accept for the car — and not the price the dealer might charge you. Also, many car insurance companies will search within a 100-mile range for price comparisons. If you live in a city, what you pay to replace your car could be quite different from what it costs at a suburban or rural dealership.

To counter the insurance company's offer, you need to get price quotes from dealers within a reasonable distance from your home. Check with your state’s insurance department to determine a “reasonable” distance. These quotes must show a higher cost than the insurer is offering. You need to prove, in writing, it will cost you more to replace your vehicle than the insurance company is willing to pay.

Regardless of the issue you are arbitrating, you must have your evidence ready in advance. It is also advisable to have an attorney assist you in preparing answers to questions from the insurance company.

Arbitration is one step removed from the courtroom, and can be intimidating. Adding lawyers' fees will drive up the cost, but in the long run it can still save you money over going to court.