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How Much Is Your Personal Injury Claim Worth?

Learn the formula used by insurance companies to determine the value of your claim.

Figuring out how much your accident injuries are worth is a critical aspect of any accident claim. And it is the part of a claim about which it is most difficult to generalize; the amount depends on your very particular circumstances. Here we try to give you a basic understanding of how insurance companies determine the value of a claim.

What an Insurance Company Must Cover

To determine what your claim is worth, you must first know the things for which you are entitled to compensation. Usually, a person who is liable for an accident -- and therefore his or her liability insurance company -- must pay an injured person for:

• medical care and related expenses
• income lost because of the accident, because of time spent unable to work or undergoing treatment for injuries
• permanent physical disability or disfigurement
• loss of family, social, and educational experiences, including missed school or training, vacation or recreation, or a special event
• emotional damages, such as stress, embarrassment, depression, or strains on family relationships -- for example, the inability to take care of children, anxiety over the effects of an accident on an unborn child, or interference with sexual relations, and
• damaged property.

Demystifying the Damages Formula

When determining compensation, it is usually simple to add up the money spent and money lost, but there is no precise way to put a dollar figure on pain and suffering or on missed experiences and lost opportunities. That's where an insurance company's damages formula comes in.

At the beginning of claim negotiations, an insurance adjuster adds up the total medical expenses related to the injury. These expenses are referred to as "medical special damages" or simply "specials." That's the base figure the adjuster uses to figure out how much to pay the injured person for pain, suffering, and other non-monetary losses, which are called "general" damages.

The adjuster multiplies the amount of special damages by 1.5 or 2 when the injuries are relatively minor, or up to 5 when the injuries are particularly painful, serious, or long-lasting. (The multiplier may be as great as 10 in extreme cases.) The adjuster then adds on any income lost as a result of the injuries.

That's all there is to the formula. However, this figure -- medical specials multiplied by a number between 1.5 and 5, then added to lost income -- is not a final compensation amount buy only the number from which negotiations begin.

Determining the Correct Multiplier

Several things determine the multiplier -- the number usually between 1.5 and 5 -- that the insurance adjuster applies to the special damages in your claim. Here are some general guidelines.

• The more painful the injury, the higher the multiplier.
• The more invasive and long-lasting the medical treatment, the higher the multiplier.
• The more obvious the medical evidence of the injury, the higher the multiplier.
• The longer the recovery period, the higher the multiplier.
• The more serious and visible any permanent effect of the injury, the higher the multiplier.
• The more of your treatment you receive from a physician or at a hospital -- or opposed to physical theropy, chiropractic, and other non-MD treatment -- the higher the multiplier.

Fault: The Final Frontier

Once you know how insurance companies use the damages formula to start negotiating, you are close to figuring out the total value of your claim.

The other elements used to decide what your claim is worth boil down to how the insurance company thinks a jury would decide your claim if it wound up in court. In measuring its chances in court, the insurance company has to figure in the cost of putting up a legal fight, on top of what a jury might award you, compared with the amount for which your claim could be settled without going to court.

The extent each person is at fault is the most important factor affecting how much the insurance company is likely to pay. The damages formula gives you a range of how much your injuries might be worth, but only after you figure in the question of fault do you know the actual compensation value of your claim -- that is, how much an insurance company will pay you.

Determining fault for an accident is not an exact science. But in most claims, both you and the insurance adjuster will at least have a good idea whether the insured person was entirely at fault, you were a little at fault or you were a lot at fault. And whatever that rough percentage of your comparative fault might be -- 10%, 50%, 75% -- is the amount by which the damages formula total will be reduced to arrive at a final figure.