The Formula Used by Insurance Companies to Calculate Auto Accident Settlements

The basic recipe indemnity companies use to calculate car accident settlements is : special damages x ( multiple reflecting general damages ) +  lost wages = settlement amount .

What Are Special Damages?

special damages are losses caused by the defendant ‘s actions that can be assigned a monetary value. The monetary value of these losses can easily be added up to an accurate dollar sum. Common General Damages include :

  • Loss of wages
  • aesculapian Expenses
  • property damage

once the adjuster can total your especial damages, he or she will multiply that dollar amount by a calculate depending on the severity of the accident and the injuries. This multiple will then be used to reflect the austereness of general damages .

What Are General Damages ?

cosmopolitan damages are losses that are a direct result of the defendant ’ mho wrongdoing but can not be assigned a particular monetary value. Examples of this include :

  • Loss of enjoyable activities
  • emotional damages such as tension and depression
  • Loss of consortium which is based on damaged relationships

Because there is now evidence such as bills or receipts that can help assign a particular respect to general damages, they are calculated a little bit differently .


As mentioned in our previous section, adjusters assign a multiplier to the summarize entire of all especial damages. This multiplier is what represents general damages in the car accident settlement recipe and is much referred to as the multiplier method .

The Multiplier Method

The multiplier method is basically assigning a value on a scale of up to 5 based on the severity of your particular damages and how significantly you have been impacted by the accident. In other words : the more unplayful the accident and injuries are, the higher the multiplier will be. For example: Let ’ s say you got into an accident where there was not much property price to the fomite, and your medical records only reported soft-tissue damage such as a twist or strain. In this case, the adjuster would probable assign a multiplier of 1.5 or 2. On the other hand, let ’ s say you got into an accident where the place damage was dangerous, and you experienced break bones, or even worse brain damage or disfigurement. In this shell, the adjuster would probable assign a multiplier of 4 or 5 .

What are Lost Wages ?

once the adjuster has that raw number ( the entire of general and extra damages ) he or she will add any sum of lost wages that the victim may have experienced as a solution of the injury.

For example, if an hurt party is forced to miss two weeks of work because of the pain of their wound, he or she would be entitled to two weeks of give from the at-fault party ’ second insurance company. The leave number is a general mind of what the indemnity company thinks the claim is deserving. Keep in mind that this formula will end up setting a stove in which the adjuster has the authority to negotiate your claim .

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