How much money are you entitled to after a crash?
If you’re like most people, you won’t know until it’s too late.
You’ll accept the first settlement offer made to you — and leave substantial money on the table.
Here’s the problem with that…
Compensatory damages are the bread and butter of every car accident claim. Knowing how they work — and what qualifies as compensatory damages — could be the difference between walking away with a fair settlement or getting far less than you deserve.
Here’s what’s covered:
- What Are Compensatory Damages?
- Economic Damages Vs. Non-Economic Damages
- How Fault Rules Affect Compensatory Damages
- Do You Really Need A Lawyer For Your Car Accident Claim?
What Are Compensatory Damages?
Simply put: compensatory damages are financial awards given to an injured victim to make them “whole” again.
They cover every loss caused by the accident. Think medical expenses and time missed from work. But also pain and suffering.
When deciding whether to file a lawsuit, compensatory damages are virtually always a main point of discussion. Their purpose is to compensate the victim for damages incurred — not punish the negligent driver. That’s done through punitive damages.
Punitive damages are not available in every case and only applies to drivers who exhibit reckless or intentionally harmful behavior.
Insurance companies have plenty of tricks up their sleeves to minimize their payouts. Having an advocate who understands the law and will fight for you is crucial.
Types of Compensatory Damages
- Economic Damages
- Non-Economic Damages
Why? Because compensatory damages fall into two categories:
- Economic damages — expenses that come with a dollar amount attached
- Non-economic damages — losses that aren’t easily quantified by a specific dollar amount
Both categories are important when filing a claim. Always ensure your attorney is identifying damages from both categories early on.
Economic Damages vs Non-Economic Damages
Economic Damages
Costs that can be directly tied to the accident are considered economic damages. Here are some common examples:
- Medical expenses
- Lost wages
- Loss of earning capacity
- Repair or replacement of vehicle
- Rehabilitation or physical therapy costs
- Cost of travel to doctor’s appointments
A critical part of recovering these damages is proof. That means keeping copies of paystubs, medical bills, repair estimates, etc. Your attorney should help compile this documentation after the accident occurs.
Even with 3 million people suffering injuries each year in motor vehicle accidents across the U.S., many victims don’t recover 100% of their economic damages. Often due to a lack of proof.
Non-Economic Damages
Most of the money offered in a settlement comes from the non-economic damages category.
These damages are unique because they compensate the victim for the intangible costs of the accident. These might include:
- Pain and suffering
- Emotional trauma
- Loss of enjoyment of life
- Permanent scarring/disfigurement
- Loss of companionship (spouse/close family member)
Again, these damages are far more difficult to attach a dollar amount to.
But that doesn’t mean they shouldn’t be factored into the settlement. According to the National Safety Council, total motor-vehicle injury costs in the U.S. reached $513.8 billion in 2023. The physical and emotional effects of these crashes are highly devastating.
Courts will typically use 1 of 2 methods to quantify non-economic damages.
- Multiplier Method — total economic damages are multiplied by a number (usually between 1.5-5) based on severity
- Per Diem Method — daily rate is set and paid to victim for each day they live with the injury
Neither method is perfect.
How Negligence Rules Impact Your Compensation
Not every state calculates compensation the same way.
If the victim shares any portion of fault, it can reduce or eliminate their ability to collect damages.
Comparative Negligence — Most states follow a modified comparative negligence rule. If you’re found to be partially at fault for the accident your compensation will be reduced by a percentage equal to your fault.
So if you sustain $100,000 worth of damages but are 25% at fault for the crash — your total recovery would be reduced to $75,000.
Contributory Negligence — There are a handful of states that follow contributory negligence rules. If you are found to be even 1% responsible for the accident, you aren’t able to collect any damages.
Click here to learn which states follow the contributory model.
The reason this matters is because MANY people get caught off-guard by this. Adjusting your claim based on your state’s laws is crucial to maximizing recovery.
Insurance Companies Lowball Settlement Offers
Here’s the reality of how insurance companies operate:
They want to settle claims as low as possible and as quickly as possible.
You should expect little to no sympathy when dealing with an insurance adjuster.
Once a claim is filed with the negligent driver’s insurance company, an adjuster is assigned to your case.
The adjuster will review the accident and make you an initial settlement offer.
You have two options at this point:
- Accept the offer (likely far below what you deserve)
- Negotiate with the insurer for a fair settlement
Many victims don’t know this, but insurance companies rarely come back with a fair offer on the first try.
If you accept the settlement without having a lawyer review it, you could be throwing away money left on the table.
Should You Hire A Car Accident Attorney?
Let’s say you don’t hire a lawyer.
You negotiate with the insurance company on your own and settle for $30,000.
A few months later you’re sitting at your doctor’s office and realize your medical bills are still mounting. You didn’t think to ask about future medical costs.
That $30,000 doesn’t look so great now.
Because you didn’t have a lawyer, you likely won’t know every damage category that applies to your case. Someone needs to play “devil’s advocate” and ensure the negligent party is held accountable for their actions.
That someone should be an experienced attorney.
Your injuries affect every aspect of your life.
You deserve compensation that covers every aspect of those injuries.
When you hire a lawyer, they will:
- Identify every damage category you are entitled to
- Work with you to gather proof of those damages
- Negotiate with insurance companies on your behalf
- Sue the negligent party if they’re not offering a fair settlement
Final Thoughts
If you’ve ever been in a car accident, you should now have a better understanding of compensatory damages.
These damages cover every cost the accident has caused you. Some damages are easy to assign a dollar amount to. Others are not.
But they still deserve to be compensated for.
To refresh your memory, compensatory damages include:
Economic Damages
- Medical expenses
- Lost wages / earning capacity
- Property damages
- Costs of transportation to doctor’s appointments
Non-Economic Damages
- Pain and suffering
- Emotional trauma
- Loss of life enjoyment
- Loss of consortium
And many more…
Once again, knowing how compensatory damages work is just the beginning.
Contacting a local attorney and maximizing your compensation should be step number one after any motor vehicle accident.
