Car Accident Settlement Calculator Formulas Demystified

mysterious car accident settlement formula

Before you can begin negotiating a car accident settlement, you need to have a general idea of how much compensation you should reasonably expect. There is no one official formula to get the monetary value of your settlement, but you can get a general idea by combining the totals of economic damages and noneconomic damages.

Economic damages are the specific expenses that you’ve had to pay, or will have to pay, as a result of your car accident (or other injury accident, such as slip and fall), and can be backed up by documentation such as receipts or pay stubs. Economic damages can include:

  • Medical treatment
  • Future medical treatments
  • Property damage (such as car repair)
  • Lost wages
  • Future lost wages

Noneconomic damages are a little harder to put a dollar value on, such as:

  • Pain and suffering
  • Loss of enjoyment
  • Disruption of lifestyle
  • Stress

Since non-economic damages are difficult to quantify, people often use a multiplier between 1.5 and 5 to come up with a reasonable number.

(total economic damages) + (total economic damages x 1.5-5)= total compensation.

The Multiplier Approach to Car Accident Settlements

An insurance adjuster will assign the value of the multiplier depending on the severity of your case. Simply put, the worse you were injured, the higher the number. Remember, an insurance adjuster’s job is to save the company as much money as possible, so they will push for a lower number. Part of your negotiation will be to raise the number and justify it. In rare cases where the other driver is completely at fault and the victim sustains long-term injury, impairing their ability to work, it is possible to argue for a multiplier higher than 5.

Let’s look at an example:

Maggie was hit from behind by a distracted driver. The force of the accident caved in her rear bumper and threw her against the steering wheel, bruising her ribs and breaking her right wrist.

Her economic damages are as follows:

Hospital bill: $2,500
Prescription pain medication: $50
Follow-up doctor visits: $200
Physical therapy: $150
Car repair: $1,800
Lost wages: $1,500
Total: $6,200

The insurance adjuster believes that Maggie’s injuries were relatively minor and assigns a multiplier of 2, bringing the total noneconomic value to $12,400.

Now let’s say that Maggie hires a personal injury lawyer who successfully argues that because Maggie’s job requires her to work on a computer, the damage to her right wrist will cause to her to miss work until she is able to type again. And say that the doctor’s report shows that she may have permanent nerve damage even after the bones in her wrist have healed. Maggie’s lawyer is able to convince the insurance adjuster to use a multiplier of 4, bringing the non-economic value to $24,800. Added to the economic damages, the total settlement amount would be $31,000.

The Per Diem Method

The per diem method involves assigning a dollar value to every day that you suffered due to your injuries, and adding that to your economic damages total. It’s the method most likely to be used if your case goes to court. You will need to have a logical explanation for how you came to assign that daily dollar amount. Many people choose to use the daily value of their employment wages, reasoning that dealing with their injuries requires as much effort as going to work.

Keep in mind that the settlement amount from an insurance company is limited to the amount of coverage in the at-fault driver’s policy. If the value of your damages exceeds the policy amount, your attorney may advise suing the driver for the difference.

Of course, no amount of money can truly heal the trauma of being injured in an accident that wasn’t your fault. Contact our office to make sure you get the full compensation that you deserve.

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