How To Estimate the Insurance Settlement for a Personal Injury

Learn how to get a sense of the potential dollar value of your personal injury insurance claim.

If you are involved in an injury case, at some point you will want to consider how much you would be willing to accept to settle the claim. Settlement may be more efficient and beneficial to you (and the insurance company) because it saves both parties the time and cost of litigation. But determining the fair value of an injury claim can be difficult. It's dependent on a variety of factors, and we'll discuss those in this article.

Types of Damages

There are two basic types of damages in personal injury cases: special damages and general damages.

Special damages. Special damages (or economic losses) are damages for which money is a comparable substitute for what was lost. This is also known as the "out-of-pocket loss" rule. Special damages can include:

  • lost wages
  • lost earning capacity
  • medical expenses
  • funeral and burial expenses, and
  • property damage

General damages. General damages (or non-economic losses) are losses for which money is only a rough substitute. General damages include:

  • physical pain and suffering
  • humiliation and embarrassment
  • shock and mental anguish
  • loss of reputation
  • loss of consortium
  • loss of society and companionship, and
  • emotional distress

Calculating Damages

Most insurance companies have a three-part process to calculate how much they will offer for a personal injury settlement.

1. Calculating special damages. The first step is to measure the special damages. This is easy to do for medical expenses and lost wages, but more difficult for future wages or lost earning capacity. It is a good idea to keep thorough and detailed records of every doctor or physical therapist that you visit, as well as all medication that you take as a result of the injury.

2. Calculating general damages. Next, you will need to calculate your general damages. Often, general damages equal 1.5 to 5 times special damages, depending upon the severity of the injury and the culpability of the tortfeasor’s conduct.

3. Adjust value to reflect savings. Finally, the insurance company will adjust the sum of the special and general damages down based on a rough estimate of the amount you will save, and risks you will not endure, by not going to trial.

Additional Factors to Consider

There are many other factors that can affect the value of your settlement. No two personal injury cases are alike. Here are a few more things to consider:

Liability. Cases where liability is clear (who was at fault) will lead to a higher settlement value than cases where liability is in dispute.

Multiple tortfeasors. Where there are multiple tortfeasors -- meaning the individuals or businesses who committed the act that caused the injury -- and each is represented by a different insurance company, there may be an issue as to how much each tortfeasor should pay.

Where the case would be tried. Some venues are more conservative than others and have a tendency to award lower personal injury damages than jury’s in more populated, urban communities. Venue, therefore, will affect the value of your settlement, since insurance companies consider what might happen if the case ended up in court.

Mitigating Damages. Damages must be mitigated, or reduced, by the plaintiff if reasonably possible. For example, if you decided not to seek treatment after your accident and, as a result, your medical expenses are now higher because your injuries are more difficult to treat, the insurance company might reduce the value of your settlement to reflect your failure to mitigate.

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