How to calculate pain and suffering like insurance companies do
An important part of filing a personal injury claim is letting the insurance company know how much money you want as a settlement. However, you can’t just pick this number out of the air and expect them to pay it. Insurance companies have a formula they use to help them value injury claims. In order to ensure a successful negotiation, it helps to understand this calculation.
The basic formula is medical damages plus general damages plus lost wages. Medical damages includes doctor’s bills and any other expenses related to your medical care. Lost wages is the income you would have received for the days you were unable to work due to the accident. These values are straightforward calculations. However, general damages are where things get tricky. As you might imagine, it's not as easy to calculate pain and suffering.
Valuing general damages
The general damages category includes nonmonetary losses, such as:
- Pain and suffering
- Permanent disability
- Emotional damages: This can include depression, stress, anxiety or anything else that affects your emotional well-being.
- Lowered quality of life: This may include missing, or being unable to fully participate in, social functions, vacations or other special events.
These losses can be either temporary, while recovering, or permanent.
To calculate this value, the adjuster starts with the amount of medical damages and applies a multiplier, based on the severity of your injuries. Minor injuries get multiplied by 1.5 or 2. For more severe or longer-lasting injuries, the multiplier may be as high as 5 or even 10.
The role of fault in valuing injury claims
The number calculated by adding up damages and lost wages may still not be the insurance company’s final value. The insurer will also look at who was at fault, and if you bear any of the blame for the accident, it will reduce your settlement accordingly.
This means that if the damages formula results in a $100,000 value for your claim, but you were 20% at fault, the insurer will reduce the value by $20,000. You will be entitled only to $80,000.
You should follow a similar calculation when deciding how big of a settlement to demand. Of course, determining severity of an injury and assigning fault are somewhat subjective, and you may not fully agree with the adjuster’s assessment. Additionally, there may be special circumstances to your case that were not taken into account.
If you do not believe the value that the insurance company calculated for your claim is fair, you can present your case for why the calculations should be adjusted during the negotiation process.