How to Calculate your Car Accident Compensation Amount

How Do I Calculate How Much I’m Owed Following a Car Accident?

Although it is generally considered a smart decision to hire a car accident attorney following a crash, in minor collisions, you may feel that you can save on lawyer fees by handling the insurance claim yourself. If you choose to represent yourself, you will want to engage in ample research beforehand by consulting resources like this page and requesting a consultation on how best to proceed with your claim.

Read on to learn how insurance companies and lawyers calculate the value of a claim and the methods they use.

Understanding the Difference Between Special and General Damages

The value of your motor vehicle accident will depend on the specific costs and losses that resulted from the crash. Most victims don’t have experience accurately calculating the total losses of a traffic collision.

In most civil accident and injury claims, the plaintiff can pursue two primary types of financial compensation. These legal payments are known as “damages.”

The two common categories of damages in civil claims are “special” and “general.” Special damages are also called “economic” damages. 

These payments are provided by the at-fault party to cover the victim’s direct monetary losses. Common examples include medical costs, missed income or wages, and vehicular property damage. 

A personal injury attorney will review the receipts, invoices, and other financial documents from your crash to determine the special damages you’re owed. The value of economic damages in a car accident case is usually simple to calculate.

Other types of harm following a car accident are less easily quantifiable. These may include:

• Physical pain
• Emotional turmoil
• Anxiety or depression
• Post-traumatic stress disorder (PTSD)
• Decreased enjoyment of life
• Disfigurement or disability

Following a car crash, “general” damages are payments meant to compensate for losses like these. This type of compensation is also called “non-economic” damages. 

It’s not obvious how insurers place value on this type of harm following an accident, and insurance companies may use several different calculation methods. 

For this reason, it’s important to speak with a knowledgeable tort attorney regarding the non-economic damages in your case. The seasoned legal team at Morgan & Morgan will ensure that you’re awarded the full value of the general damages in your case. 

Because these sorts of harms aren’t easily quantified, insurance providers often attempt to devalue them. Doing so guarantees that insurance corporations pay the victims of accidents and injuries as little as possible. If your motor vehicle collision resulted in significant intangible harm, it’s best to consult with a skilled legal professional.

What information is needed to make a compensation estimate?

Typically, the compensation you're entitled to after a car accident is the sum total cost of your injuries and car repairs. When calculating the value of damage to your vehicle, important details that should be taken into account include the initial value of the automobile, its condition at the time of the accident, the depreciated amount, and the mileage. Additionally, when estimating the costs of repairs, one must look at the cost of the specific parts that need replacing, rather than providing an average figure for repairing rear-end damage, for example.

Injuries are far more difficult to calculate because unlike car parts or automobiles, there is no market price for a body part or type of injury. Furthermore, the effects of an injury vary from person to person. For instance, if there is a car accident involving a young athlete and a retired elderly woman, and the athlete loses a limb, they would experience far greater financial, emotional, and psychological pain and suffering than the elderly woman, who is no longer working. Whereas the athlete’s earning capacity will be greatly diminished and the course of their life will change, the grandmother will likely face fewer long-term consequences.

Once your lawyer has collected all of the necessary information, they will use a formula to evaluate your claim’s value, the most common being the multiplier method and the per diem method.

How do insurance adjusters determine the value of a claim or settlement offer?

Following an accident, the liable party's insurance company is required to pay the following costs:

• Medical bills and related expenses
• Lost wages from work and other lost income
• Pain and physical suffering
• Permanent physical disability or disfigurement
• Emotional damages stemming from the above costs

In accidents where one isn’t claiming pain and suffering as a damage, it’s typically a matter of adding up the assorted medical and repair bills. However, in cases involving vehicle replacement and pain and suffering, the insurance company will provide additional compensation alongside the amount given to cover your medical bills, vehicle repairs or replacement, and lost wages.

Insurance companies use a variety of methods to calculate the value of a personal injury claim, many of which are different forms of the multiplier method. Unlike lawyers, however, insurance companies rarely use whole numbers as multipliers and instead utilize complex computer algorithms to determine the multiplier. The equation insurance companies use to calculate pain and suffering is sometimes called the damage formula.

What is the multiplier method?

The multiplier method is among the primary ways insurance companies and lawyers calculate the cost of pain and suffering damages, and works by applying a multiplier to the sum total of special damages. The multiplier method is premised on the belief that injuries with more quantifiable damages, like hospital bills, tend to involve more serious car accidents and thus require a multiplier to determine the accident's true cost.

For instance, if your medical bills following a car accident are $7,000 and your injuries led to $1,500 in lost wages, lawyers will often multiply the sum of the actual damages — $8,500 — by a figure that often falls somewhere between one and five, with three being the most common multiplier. In this case, the total damage amount would be $25,550.

The multiplier will generally increase or decrease depending on the severity of your injuries, any aggravating circumstances, and the amount of time you need to recover. Whereas a serious accident may merit a multiplier of three or four, the multiplier in a minor fender bender can be as low as one or two. Furthermore, the multiplier can be greater than five if aggravating circumstances are in play, such as the at-fault driver being intoxicated at the time of the accident. Conversely, if your behavior or negligence was a factor in the accident, your lawyer may use a lower multiplier to tabulate your pain and suffering amount.

What are the criticisms of the multiplier method?

Generally, there are two reasons people criticize the multiplier method. One criticism is focused on the argument of arbitrary multipliers, meaning that due to the fact that different attorneys use different multipliers, the results are often inconsistent. For example, one attorney may triple the special damages, while another might apply a multiplier of six, opening up a wide gap of variance between the two estimated sums. Additionally, the multiplier method can produce misleading results. For example, a drummer who injures their wrists in a car accident might have lower medical bills than an administrative assistant with a wrist injury that requires expensive surgery. However, the administrative assistant would likely be able to return to work after recovering from the surgery, while the drummer may suffer from severe emotional and psychological distress because they can no longer make a living playing music.

By simply looking at the cost of medical bills, the multiplier method can fail to account for more long-term costs and immaterial damage that will affect someone for the rest of their life.

What is the damage formula, and how does it work?

When negotiating a claim, the at-fault party’s insurance adjuster will determine the sum of all medical expenses resulting from the accident, which are known as medical special damages, or special damages. To determine the settlement offer amount for pain and suffering, emotional damages, and permanent disabilities (general damages), the adjuster will multiply the amount of special damages by roughly one and a half to three in situations where the injuries are minor. When the injuries are more severe and painful, the adjuster will multiply the amount by five or more in addition to lost income. In most settlements, that total becomes the starting point for negotiations.

Once the starting point for negotiations is established, additional facts about the accident and the injuries it caused will be revealed that will change the settlement amount. Since the multiplier can range from one and a half to five, there is a wide value range that can result from the damage formula.

How accurate are car accident settlement calculators?

As discussed above, any method used to calculate a settlement amount is imprecise because it requires far more information to determine an accurate estimate than car accident settlement calculators are capable of collecting. In addition, similar to criticisms about the arbitrary nature of the multiplier method, there is some distrust regarding car accident settlement calculators due to there being no common system in place to ensure that the amount estimated by one calculator will be anywhere close to the amount generated by a different one.

Ultimately, the accuracy of a car accident settlement calculator depends upon the information it allows you to provide, the information the calculator uses to estimate different kinds of damage, and its relative ability, or lack thereof, to take into account the many particulars associated with your case. So while it is not wise to take the amount generated by a calculator as a reliable source, they do help give you a ballpark figure from which you can narrow down to find a more accurate estimate.

What is the per diem method?

Another method some personal injury attorneys and insurers use to calculate pain and suffering damages is the per diem, or daily rate, method. Simply put, the per diem method involves generating a monetary amount that you receive every day or week that you suffer from your injuries after an accident.

Why hire a lawyer to determine what a car accident is worth?

As we covered in our section on the benefits of hiring a personal injury lawyer, such attorneys are specifically trained to calculate the maximum value of your claim using their professional experience and knowledge. Simply put, when hiring a car accident attorney, you are taking a great deal of the guesswork out of figuring out how much your claim is worth.

Should I Accept the Insurance Adjuster’s Initial Settlement Offer?

In most cases, you should not accept the initial offer from the relevant insurance company. Adjusters are incentivized to pay as little as possible on every claim filed.
 
Because of this, insurers will often suggest a quick settlement amount to avoid paying the full value of the claim. Unfortunately, many car accident victims are unaware of this strategy.
 
Insurance companies boost their bottom lines by denying and devaluing traffic accident claims. This allows them to profit from the monthly premiums that policyholders pay.
 
If an insurance provider offers you a settlement for your car accident damages, it’s a good idea to talk it over with a professional. The legal experts at Morgan and Morgan will negotiate effectively on your behalf.
 
Our team will not settle your claim for less than the full amount of damages you’re owed.

Should I Hire an Attorney With Trial Experience?

Yes. When you are pursuing compensation for a motor vehicle collision, it’s critical to hire a lawyer who can take your case to court. Most civil accident and injury claims don’t result in a lawsuit or trial, but some do.
 
If the opposing party in your car crash case is uncooperative, you should be prepared to fight. Hiring a lawyer without trial experience may result in a less-than-desirable outcome.
 
You shouldn’t have to be concerned that your attorney will accept less money than you deserve. Inexperienced lawyers may be tempted to settle for an inadequate amount to avoid the daunting prospect of litigation.

Managing a case in the courtroom requires a specific set of skills and competencies. A tested trial attorney will present a powerful case to recover the financial compensation you’re due.
 
Fortunately, Morgan & Morgan has decades of experience representing our clients in court. As the largest tort law firm in the United States, we boast a team of more than 700 trial-ready legal professionals.
 
If negotiations break down because of an unreasonable insurance provider, we’ll file a lawsuit on your behalf and go to whatever lengths we must to recover the money you deserve.

Should I Hire a Law Firm With Significant Resources to Represent Me?

Absolutely. It’s important to have a legal team behind you that has the resources necessary to win.
 
Many car accident claims involve fighting large insurance corporations. These companies typically have the resources needed to lengthen any resulting legal proceedings.

When an unscrupulous insurance company knows that they don’t have a strong case, they may try to wait out the claimant. When the victim is represented by a small or under-resourced tort law firm, they may be unable to pursue the case as long as necessary.

This tactic allows negligent or uncooperative parties to avoid their financial responsibilities. Having a well-resourced firm on your side will give you the highest likelihood of a positive outcome in your case.
 
If your lawyer or firm doesn’t have the resources necessary, you may not be able to recover the full amount of damages that you have coming to you. Don’t let this happen to you.
 
Reach out to the veteran legal professionals at Morgan and Morgan. We have the resources needed to help you take on greedy insurance providers and win.