Have you been injured because of someone else’s negligence? If so, you may have a stack of mounting medical bills to deal with. Most importantly, your injury may affect your earning capacity leaving you unable to perform your job duties and earn income.
This is a tough situation. So, you should focus on (a) recovering from your injury and (b) seeking compensation through a personal injury claim. Unfortunately, in most cases, it means that you will have to deal with your insurance company or the insurer of the at-fault party.
Either way, it’s vital to understand how insurance companies calculate personal injury claims. Knowing this will help determine how much money to expect from the settlement and know how much to settle for.
Note: You shouldn’t rely on the insurance company’s estimation of your claim’s worth because insurers care about protecting their bottom line and growing their profits. Insurance companies make money by undervaluing and denying claims. That’s just how business works.
For this reason, it’s important to have a skilled personal injury attorney on your side. Our personal injury lawyers help clients in Georgia, Mississippi, and Tennessee deal with insurance companies. We will help calculate personal injury claims to ensure you receive the compensation you deserve.
What factors affect the value of my personal injury claim?
A personal injury settlement amount is much more than the sum of your medical expenses, property damages, and lost wages. When calculating how much your claim is worth, the insurance company must consider a variety of factors to arrive at the fair value:
- The total cost of your medical treatment, rehabilitation, physical therapy, surgeries, medication, hospital bills, out-of-pocket expenses, and anything else related to diagnosing, treating, and recovering from your injury;
- The cost of repairing or replacing your damaged property;
- If your vehicle has damage, it’s vital to consider the value of your car, its condition at the time of the crash, the mileage, and other factors;
- How many days or weeks you had to miss from work because of your injury;
- How the injury affects your earning capacity;
- The degree of daily life disruptions;
- Whether the accident or injury caused any mental or emotional trauma or distress;
- The recovery timeline;
- Whether the expectation is full a recovery;
- The strength of your legal arguments and the availability of evidence to support your injury claim.
These are not the only factors that need to be considered to evaluate your personal injury claim. Unfortunately, many insurers do not take into account or purposefully ignore factors that may increase the value of your claim. As a result, the insurer may end up offering to settle your claim for less than you deserve.
It’s best to consult with a personal injury attorney in your state to discuss your unique situation and determine all of your past, present, and future, long-term and short-term losses and damages.
How do insurance companies determine the value of personal injury claims?
Typically, when you suffer an injury due to someone else’s fault, the at-fault party’s insurance company may cover the following expenses and damages:
- Medical expenses stemming from the accident
- Damage to the property such as your vehicle
- Loss of income due to your inability to perform your duties
- Pain and suffering, emotional trauma, and other non-economic damages caused by the accident and injuries
- Compensation for disfigurement or permanent disability, if any
In personal injury cases where the claimant is not asking for non-economic damages (e.g., pain and suffering, mental anguish, compensation for disfigurement, and others), determining the value of a claim is a straightforward process: All you need to do is add up medical bills, the cost of repairing or replacing the property, and lost wages.
The resulting figure will be the sum of recoverable economic damages. As for the non-economic damages, which are more subjective in nature, the insurance company will have to use one of the methods to calculate the value of your claim.
Unlike personal injury attorneys, insurance companies often rely on one-size-fits-all calculators and less-than-ideal algorithms to estimate your damages and losses. However, such methods cannot determine the claimant’s damages accurately, which is why attorneys take a more personalized approach when calculating personal injury claims to ensure that the client receives the full compensation that they are entitled to.
What is the damage formula?
Insurance companies commonly use the so-called “damage formula” to estimate the claimant’s damages and losses. The insurer first establishes the sum of the injured person’s medical expenses following the accident.
To determine the claimant’s compensation for pain and suffering and other non-economic damages, the insurance company will multiply the sum of all medical bills by a certain number that depends on the severity of the injury:
- Minor injuries: their medical expenses are usually multiplied by 1.5 to 3.
- Medium injuries: the sum of medical bills is multiplied by 3 to 4.
- Severe or permanent injuries: the total amount of medical expenses can be multiplied by 5 or more.
Then, the insurer will add lost wages to the resulting figure, which will be the starting point for negotiations. From this point, the discovery of more facts and evidence may change the settlement amount.
What is the multiplier method?
Many insurance companies use the multiplier method to assign a dollar value to the claimant’s non-economic damages such as pain and suffering. As its name implies, the method works by applying a multiplier (usually, a number ranging from 1 to 5) to the sum of the injured person’s special damages, including medical bills, property damages, and loss of income.
For example, if your medical expenses total $10,000, while the cost of repairing your car after the accident is $5,000, and your injury and recovery resulted in $2,000 in lost wages, the insurance company will multiply the sum of your special damages – $17,000 – by a certain multiplier that usually ranges from 1 to 5. In most cases, insurers use 3 as the multiplier. If that’s the case, your settlement amount will total $51,000.
The multiplier depends on the severity of the claimant’s injury, recovery timeline, the presence of any aggravating circumstances, and many other factors. In some cases, the multiplier can be higher than 5 (for example, if the at-fault party was operating a vehicle under the influence of alcohol at the time of the crash).
What is the per diem method?
The third method that insurance companies use to calculate the victim’s pain and suffering and other non-economic damages is the “per diem” method.
If you know Latin, “Diem” translates to “day”. With this method, your non-economic damages are calculated based on a daily rate.
It means that you can demand a certain dollar amount for every day (per diem) that you suffer from the injuries and pain caused by the at-fault party.
How reliable and accurate are online settlement calculators?
Online settlement calculators could give you a very rough estimate of how much your personal injury claim is worth. However, you shouldn’t rely on their accuracy too much.
Internet personal injury settlement calculators are not 100% – or even 70% – accurate in most cases. Those online calculators use one-size-fits-all formulas and questionable algorithms to determine the value of your claim.
Unlike a personal injury attorney, a calculator will not consider all unique circumstances and factors associated with your injury to estimate your claim’s value accurately. That’s why it’s best to schedule a consultation with a knowledgeable and detail-oriented personal injury attorney. Here at Howe.Law we review your unique case and calculate how much your claim is worth based on the circumstances.
How can your fault affect how to calculate personal injury claims
The settlement amount also depends on your degree of fault. Thus, if you were partially responsible for causing the accident, your compensation will most likely be reduced by the percentage of your own negligence.
Most states use either the pure comparative negligence or modified comparative negligence system. Mississippi uses the former. Under the pure comparative fault system, victims can recover damages regardless of their degree of fault (Miss. Code § 11-7-15). In other words, you can seek compensation for your injuries even if your fault is greater than 50%.
However, things are different if you live in Georgia or Tennessee, which use the modified comparative negligence law, according to O.C.G.A. § 51-11-7 for Georgia and TCA § 29-11-103 for Tennessee. Under the modified comparative fault system, you may not seek compensation if your degree of fault exceeds 50%.
You need a personal injury attorney to calculate personal injury claims
As you can see, online settlement calculators are unreliable and inaccurate. Insurance companies are looking out for their own profits and aren’t interested in settling your claim for a fair amount.
That’s why you need a personal injury attorney to:
- investigate your particular case;
- calculate how much your claim is worth; and
- fight for fair and maximum compensation.
Schedule a free initial consultation with our personal injury lawyers at Howe.Law to provide you with an accurate estimate. Call 844-876-4357 to get a case review.