How do insurance companies decide how much they’ll pay to compensate someone for an injury?

While the final payment figure depends on negotiations with the injured person, insurance companies and lawyers do use a formula to calculate a range of compensation for an injury. In general, if you’ve been injured you can expect to be reimbursed for:

  • medical care;
  • lost income;
  • temporary and permanent pain and other physical discomfort; and
  • loss of family, social and educational experiences.

In calculating the range of compensation, a claims adjuster begins with the medical expenses. Then the intangibles pain and other noneconomic losses are added in by multiplying the medical expenses by 1.5 to 2 times if the injuries are relatively minor, and up to 5 times if the injuries are more significant. The multiplier can go still higher sometimes as much as 10 times medical expenses if the injuries are particularly painful, serious or longlasting. Finally, lost income is added to that amount.

Will my health insurance coverage or paid sick-leave from work limit my compensation for an accident?

The fact that your insurance company, rather than you yourself, may have paid for your medical expenses is not relevant to your right to recover medical expenses from another party. The same goes for whether your time lost from work was covered by sick leave or vacation pay. In fact, it is improper for an adjuster even to ask about such payments. You paid for your health insurance and earned your sick leave or vacation pay; now the insurance for the person who caused the accident has to pay.

Your own health insurance, however, may require that, out of your settlement, you reimburse it for some or all of the amounts it has paid to treat your injuries. Learn more on

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