How Car Accident Settlements Are Calculated

Two drivers man arguing after a car traffic accident collision

Car accident settlement are calculated based on the extent of damages incurred by an injured victim. Insurance adjusters and legal teams can measure the extent of damages by using an auto accident settlement formula. Each accident will have its unique factors to consider, as damage costs will vary depending on the nature and severity of the injuries sustained. 

Two drivers man arguing after a car traffic accident collision

Victims should seek immediate medical treatment following a crash. Seeking medical attention allows a victim to have documentation of his or her injuries. Clear documentation from a medical professional acts as a crucial piece of evidence in a car accident claim. After seeking medical attention, victims should retain a car accident lawyer to recover a settlement from the liable party. 

Florida’s pure comparative negligence laws allow accident victims to receive compensation even if they partially contributed to the accident that resulted in injuries. A car accident lawyer in Clearwater can help the victim hold the responsible driver accountable, even if he or she was partially at fault for a crash.

Determining Car Accident Settlement Amounts

The amount of compensation received by a victim will depend on the value of his or her non-economic and economic losses. Economic losses are calculated by adding up all the direct financial costs of an accident. Non-economic losses, however, don’t have direct financial costs. Instead, they are calculated using a formula. To determine car accident settlement amounts, insurance companies may use a multiplier approach, per diem method, or other algorithms to create a formula. 

The Multiplier Approach

By using the multiplier approach, insurance adjusters can ease the challenging process of allocating a monetary value to a victim’s intangible damages. Adjusters begin by finding the sum of the medical expenses and lost wages resulting from a victim’s car accident injuries. The number then gets multiplied by a factor ranging from 1.5 to 5. This total represents the financial equivalent of the pain and suffering a victim experiences. 

Victims left with permanent injuries are allocated a higher multiplier factor. Permanent injuries include disfigurement and lifelong disability. Additionally, injuries that require a prolonged hospital stay or significant pain may have a higher multiplier factor.

The Per Diem Method

The per diem method is used to help insurance adjusters calculate the number of days the car accident victim is likely to miss work. The number of days calculated will then give insight into the accident victim’s lost wages. Calculations are made by taking the total number of days and multiplying it by the amount the victim would have earned per day at work if not for the injuries produced by the accident. 


Algorithms are used by insurance companies to put a monetary value on the accident victim’s pain and suffering. Insurance adjusters will evaluate variables to define the value of a victim’s claim. These variables include the nature of the victim’s injuries, the type of treatment he or she received, and his or her age.

Damages in a Car Accident Settlement

Auto accidents can have adverse outcomes that alter a victim’s capacity to perform in his or her day-to-day life. These alterations may include a victim’s ability to walk, eat, sleep, take baths, drive, or work as he or she did before the accident. Victims can seek financial recovery for the impact of a crash by claiming these losses as damages.

A car accident victim must prove that the collision resulted in his or her physical pain, injuries, mental agony, or incalculable suffering to recover compensation. Evidence must show that the at-fault driver was engaging in negligence at the time of the accident. Distracted driving is a prime example of engaging in a negligent act while operating a vehicle. 

Non-Economic Losses

To determine fair insurance payouts for car accidents, non-economic damages must be quantified. Non-economic damages can be difficult to appraise. Insurance companies frequently use the multiplier approach or the per diem method when calculating the value of a victim’s non-economic losses. A large portion of a non-economic damage award hinges on the victim’s pain and suffering.

Pain and suffering after an auto accident is defined as physical discomfort or emotional distress caused to a victim by another individual’s negligent or deliberate actions. To recover pain and suffering, the victim must have:

  •  Suffered permanent bodily impairment, such as loss of an appendage, eyesight, or hearing, 
  • Sustained severe injuries,
  • Experienced significant or lifelong complications, 
  • Sustained permanent disfigurement or scarring,
  •  Suffered the loss of a loved one through a wrongful death

 To calculate pain and suffering losses, the severity of limitations the victim experiences will be observed and broken down into two categories: physical and mental.

Physical pain and suffering comprise temporary and chronic pain that a victim may experience after a car accident. Physical discomfort from headaches, neck pain, pain from fractured or broken bones, and pain from other injuries may also be eligible for compensation. Additionally, a victim may be eligible for compensation due to future physical pain and suffering caused by the accident. 

Mental pain and suffering is attributed to any mental distress the victim experiences due to the injuries he or she sustained in the car accident. Common mental anguish includes anxiety, depression, grief, psychological trauma, and stress. Customarily, any adverse emotion directly caused by the accident may qualify as mental pain and suffering.

Economic Losses

Economic damages are the direct financial costs of an accident. These can be condensed to

  • Any present expenses the car accident victim is experiencing
  • Various medical expenses the victim incurred 
  • Funeral expenses left to burden the surviving family
  • The loss of support or services the victim experiences due to the nature of his or her injuries 
  • Lost wages due to time missed from work
  • Any other economic losses the car accident victim has suffered that would not have occurred had the victim not been injured.

Calculating economic losses post-accident is often less complicated than non-economic losses because of the clear documentation associated with financial costs.

Factors That Could Affect a Settlement Amount

Laws vary from state to state, which makes it important for an accident victim to understand his or her legal rights. Two of the most influential elements that can affect a victim’s settlement value are the severity of the injuries suffered and the strength of legal representation. 

Florida has several policies in place to help protect its accident victims, including no-fault insurance and personal injury protection policies (PIP). Florida also has caps on damages awarded. These factors can influence the amount of damages a claimant is awarded.

No-Fault Insurance Policy

Florida car accident victims will benefit from an understanding of the state’s no-fault accident law. Under this statute, victims sustaining accident injuries are obligated to first seek coverage via his or her auto insurance provider. Florida’s no-fault law allows victims to obtain coverage from their insurance before a conclusion is made as to which party involved was at fault. 

Personal Injury Protection Policies (PIP)

Drivers in Florida are required to have a minimum of $10,000 in personal injury protection (PIP) coverage via their auto insurance provider. The importance of this coverage is often underestimated. Personal injury protection is essential to seek initial coverage or a rebate post-accident. The personal injury protection policy provided by the victim’s insurer should deem the victim eligible to receive up to 60% of lost wages, up to 80% of medical expenses, travel reimbursement for medical appointments, and $5,000 in death benefits.

There are constraints to PIP coverage that a victim needs to consider after his or her accident, including benefit limits and the time frame for medical coverage. Benefits for personal injury protection do not exceed $2,500 unless the victim is determined to have an emergency medical condition (EMC). Victims must seek medical treatment within 14 days of their car accident. Any medical treatment sought after 14 days will be deemed ineligible for compensation under a PIP policy. 

Personal injury protection policies cover a plethora of damages, but do not cover non-economic losses. With the assistance of a personal injury attorney, such damages may be recoverable through filing a third-party claim against the at-fault driver’s insurance company. 

Caps On Damages Awarded

Damage caps are legal limits that determine the amount a victim may be compensated for in personal injury cases. Damage caps involved in personal injury collision cases apply to punitive damages. Punitive damages are awarded to punish or deter the reckless behavior of the at-fault driver. In Florida, the cap on punitive damages is no more than a three times multiplier of the total compensatory damages, or a maximum of $500,000, depending on which is the greater amount (with exceptions).

Steps to Follow After a Car Accident

In Florida, a car accident victim should follow five steps to maximize his or her personal injury settlement. The five actions include taking photographic evidence of the scene, documenting details of the accident, contacting his or her insurance provider, seeking medical treatment, and contacting a car accident lawyer.

Seeking Medical Treatment

Anyone injured in an accident needs to seek medical attention immediately. Victims should retain copies of any medical records and provide them to their attorneys. Immediate medical attention helps to prevent a victim’s injuries from worsening and assists in speeding up the recovery process. Medical professionals can detect any hidden injuries or potentially harmful symptoms. Medical professionals can also assist in establishing a direct link between a victim’s injuries and the accident.

Take Photographs of the Accident Scene

If a car accident victim is able, he or she should take pictures of the scene of the accident. The photographs will provide the victim and his or her legal representation with evidence. This evidence includes documenting any environmental conditions that are pertinent to the accident, the positions of any vehicles involved, and the damage done to the affected victims.

Document Details of the Accident

If a victim is physically and mentally capable, he or she should immediately document any relevant details post-accident. These accident details include information such as the time it took place, the make and model of the involved vehicles, the names and contact information of drivers and passengers, any roadside debris, and other evidence that may be essential. Additionally, victims should take copies of the police report and look for nearby traffic or security cameras that may have captured the accident.

Contacting Insurance Providers

No matter the severity of the car collision, accident victims should begin communicating with their vehicle insurance provider. Victims should not hesitate to contact both their insurance company and the liable party’s insurance provider.  To obtain cost-related coverage, victims should place the call after first receiving any medical attention necessary, contacting the police, and hiring an attorney. The insurance provider will need to be informed of any changes or progressions concerning the accident. A car accident attorney can handle communications between the parties involved.  

Contacting Legal Representation

As a victim, having a car accident attorney on your team will be a critical factor when understanding the legal process. Victims who file a personal injury claim should consult their personal injury lawyer before accepting any offers from insurance companies. Insurance representatives may try to minimize payouts on personal injury claims. Additionally, unrepresented car accident claims typically yield lower settlement awards. Seeking the help of a Clearwater car accident lawyer helps secure your ability to recoup the true cost of your accident.

Insurance adjusters may attempt to use tricks or arguments to deny or lower a victim’s settlement. An attorney will assist the victim in collecting and organizing all evidence to satisfy the burden of proof. An attorney will help victims figure out how much compensation they are eligible for and what actions should be taken to lessen their financial burden.

James (Jim) Magazine is a Florida Board Certified Civil Trial lawyer who has spent his career helping injured victims. Jim is licensed to practice law in the State of Florida since 1990 and is also admitted to practice at the Appellate level and admitted to the United States Supreme Court.

Years of Experience: More than 30 years
Florida Registration Status: Active
Bar Admissions:
Clearwater Bar Association
West Pasco Bar Association

James (Jim) Magazine is a Florida Board Certified Civil Trial lawyer who has spent his career helping injured victims. Jim is licensed to practice law in the State of Florida since 1990 and is also admitted to practice at the Appellate level and admitted to the United States Supreme Court.

Years of Experience: More than 30 years
Florida Registration Status: Active
Bar Admissions:
Clearwater Bar Association
West Pasco Bar Association