How Do Insurers Value an Injury Claim?

Here's how insurance companies typically figure out how much a personal injury case is worth.

Updated by , J.D. University of San Francisco School of Law

Figuring out how much your claim is worth is a critical aspect of any personal injury case. The answer always depends on your very particular circumstances, but insurance adjusters often follow similar procedures—and place the most weight on the same key factors—when determining the value of a claim.

What an Insurance Company Must Compensate

To determine what your claim is worth, you must first know the types of losses (damages) for which you might be compensated after an accident or injury.

Usually, a person who is found at fault 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
  • "pain and suffering" and 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.

Get more details on damages in a personal injury case.

The Insurance Company's Damages Formula

When determining compensation, it is usually fairly 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 the personal injury settlement negotiation process, an insurance adjuster usually 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 nonmonetary losses, which are called "general" damages.

When the injuries are relatively minor, the adjuster might multipy the amount of special damages by 1.5 or 2. When the injuries are particularly painful, serious, or long-lasting, the adjuster could multiply the amount of special damages by up to 5. (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 may be all there is to the formula, if the adjuster is using one. 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, but only the number from which negotiations begin. Get tips on negotiating a personal injury settlement with the insurance company.

Figuring Out the Percentage of Each Party's Fault

The extent to which each person is at fault for the underlying accident may be 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, or if you were a little at fault, or if you were a lot at fault. 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. Get details on figuring out who was at fault for an accident.

For an extensive discussion of determining the value of your claim (including many case examples) see How to Win Your Personal Injury Claim, by Joseph L. Matthews (Nolo).

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