How are car accident settlements calculated?

The first part of negotiating your car accident settlement is to determine a ‘reasonable’ amount of compensation you would accept to give up going to court. Most auto insurance companies and personal injury attorneys rely on certain settlement formulas to establish a starting point for a car accident settlement. This is the case for all types of personal injury cases, including car accidents.

The most common formula to figure a car accident settlement is to use a multiplier against your medical expenses to devise a rough estimate for non-economic damages – your pain and suffering. This number will be added to your economic losses, such as property damage, lost income and medical bills to get to an amount of money that serves as a starting point for negotiations.

The key question in calculating a car accident settlement is to decide what your pain and suffering from your injuries are worth. Pain and suffering include physical discomfort, anxiety, stress and various negative effects of the accident injuries, and the impact the injuries have on your life.

The typical way to value these damages is the use the multiplier. To arrive at a dollar figure that is a starter for negotiations, an insurance adjuster usually ads up the special medical damages (all quantifiable losses) and multiply that by 1.5 to 5.

What the multiplier will be depends on the severity of injuries. How serious are they? How many doctor visits have you had? How much treatment will be needed in future months? Will you make a full and healthy recovery. Will there be any permanent effects to your injuries? How did the accident and your injuries affect your life?

Naturally, the multiplier that is used against your injuries is always the bone of contention between you, your attorney and the insurance company. You will want a higher multiplier, and the adjuster will argue for a lower multiplier. There is some wiggle room in these negotiations, but you should know that a 4 or 5 multiplier is reserved for very serious injuries that require long term rehabilitation for months or years. The most serious 5 multiplier usually is for injuries that are permanent and life altering. Most accident settlements involve a 2 or 3 multiplier.

Once you have used the multiplier to get to a figure for general damages, adding that figure to the special damages total will provide the insurance adjuster and you a reasonable idea of the value of the claim. At the very least it is a fair starting point for negotiations.

Keep in mind that you may need to drop your target settlement amount somewhat if your own negligence partially contributed to the accident. Depending on your state, the law will require the award from a jury to be reduced by your level of fault. Most states say that if you 50% or more responsible for the accident, you cannot recover damages. A few, such as Virginia, say that if you are 1% responsible for the accident, you cannot collect damages at all.

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