What is the Formula for Personal Injury Settlements

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Before you can file a legal case and claim compensation for your injury from an accident, you need to know the formula for personal injury settlements. Beginning the legal procedures with exact and proper knowledge and dollar value of your injuries can be a significant factor in winning the case and getting the settlement amount. Here we look at the common formula for personal injury settlements and ways of calculating your damages.

The Formula for Personal Injury Settlements

The first step in settlement negotiation is to calculate the amount of money that is the minimum for you to clear out the legal claim of compensation. Most insurance companies and accused’s lawyers accept that amount if you have calculated it by standard formulas.

The formula for personal injury settlements that is most common includes a multiplier and your medical costs to come up with an estimated value of non-economic damages. This amount is then multiplied by the economic losses that may include medical bills, property loss, and loss of income. Thus you get a dollar amount with which you can start your negotiation for settlements in the court.

Besides, there are two basic approaches in calculating personal injury settlements in the above process. These methods include the multiplier method and the daily rate method.

The multiplier method

This is the most common approach mainly used by insurance companies. They add up all your damages that have an economic value and multiply the amount between the numbers 1.5 to 5. This unique number is the ‘multiplier’ which depends on some factors of your accident.

Such factors include the seriousness of your accident, time to complete recovery, impact of the injuries on your day-to-day life, and the fault of the accused party.

Companies frequently use this method and they tend to use the lowest possible number in multiplying with the economic damages. Negotiation usually takes place to settle on a higher amount for the victim and to agree on a smaller amount for the companies.

The daily rate method

Another name of this method is “Per Diem” method which comes from Latin and means ‘per day’. The main concept of this method is to claim a particular dollar amount for each day you are living with the pain caused by the accident.

In this approach, you will have to show and justify your daily consumption amount. One way to prove that is to show your actual and daily income. You can also argue to the fact that despite the pain caused every day of your life, and you are making an effort to go to work.

Let’s exemplify the approach for better understanding. Assuming that you earn around 45,000 CAD per year and work a total of 250 days a year, you have been involved in an accident that caused a severe neck injury.

Due to the injury, you have required medication for 2 months and suffer pain for another 3 months, so in total 5 months or 150 days. As you earn 180 CAD per day, the amount you can claim for settlements is around 27,000 CAD.

This method is primarily used in cases of serious injuries. As the court procedures can become very complicated and harsh, it is advised to get legal support through lawyers for this approach.

Calculating Two Types of Damages

Damages from accidents can be classified into 2 categories, and in some cases, settlement amounts are calculated separately according to each loss. 2 types of damages are special and general damage.

Calculating special damages

Special damage includes the hard-cost from the injuries, and you add them up to determine a number. The amounts include:

  • Previous and future loss of income
  • Medical bills that include therapies or special care
  • Lost or damage to personal belongings
  • Out-of-pocket expenditures, like medications, crutches,  transportation or doctors appointments
  • Replacement costs, such as child and family support, housekeeping, etc.whilst you were unfit to work

The calculation of the total amount for special damages requires all your medical bills and all healthcare plans that explain the detailed costs of the treatment.

How to Calculate the Damages

General damages include mainly non-physical injuries which are why they can be challenging to formulate. Each person can be injured differently, and so the pain and suffering are unique in each case. Some of the general damages include:

  • Emotional and mental distress
  • Physical aches and pains
  • Anxiety, depression and frustration
  • Loss of consortium
  • Problem in concentration
  • Sleep loss or insomnia

The multiplying number in the multiplier method is mainly the value of the general damages. Special damages are multiplied with a number between 1.5 and 5.

Factors Affecting the Formula for Personal Injury Settlements

Limits in policy

If the compensation claim value is much higher than the insurance limit, the only thing you can do is to file a lawsuit against the person responsible for the accident.

Blame sharing

lawyers from the opposite sides will be intended to shift some of the blame on you and so the settlement amount can fall down. In some situations, if both you and the accused share 50-50 blame, your compensation claim is likely to be denied.

Unrelated medical bills

Insurance companies in some cases check up your medical bills by experts or professionals on their own. So if unnecessary and unreasonable expenses are included, be sure that they will be cut out.

Location of settlements

Insurance companies or accused person will look to settle the issue outside the court as court procedures incur extra legal costs. In situations like that juries favor the victims mostly and you can get your calculated settlements to fall down slightly due to the legal cost cuts.


Most settlements in personal injury claims are completed outside the court with negotiations between the lawyer and the insurance company adjusters. So, it is important to use the formula for personal injury settlements that is common and widely accepted.

In any case, it is highly recommended to attain support of lawyers so that you are not settled on a lower amount, which is the first instinct of every insurance company, than you calculated through the formula.



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