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How Insurance Companies Determine What A Claim Is Worth?

An accident can result in damage to specific victims and to particular pieces of property. Insurance companies consider all types of damage, when calculating the worth for a given accident, one for which the victims have filed a personal injury claim.

Insurance companies use a formula

One figure in that formula comes from the summation of specific damages. Those are the medical expenses, the care expenses, damage to the body, such as a disability or disfigurement, loss of family, loss of social or educational experiences, emotional damages and damaged property. A second figure is usually a number between 1 and 5, which represents the effect of the victim’s pain and suffering.

In cases where the victim has suffered a catastrophic injury, the number used to represent pain and suffering could be something between 6 and 10. That numerical representation of pain and suffering becomes one factor in a multiplication of 2 factors. The other factor is the total obtained by summing up all of the damages mentioned above.

The product gets used to determine what a claim is worth. That product was obtained without taking into consideration the loss of wages. Hence, it becomes necessary to make a second calculation, using a formula that includes the value for the victim’s loss of wages. That loss gets added to the product obtained from the first formula.

The function of the figure obtained by using the 2 formulas:

That figure serves as the starting point for negotiations between the insurance company and the victim, or the victim’s lawyer. In other words, that figure becomes the insurer’s initial offer.

As the 2 sides negotiate, each side can refer to issues faced by one of the 2 parties. Mention of emotions can have a large effect on the extent to which the insurer’s initial offer gets changed. An emotional issue often arises from the fact that one or more victims suffered an emotional damage. Stress, embarrassment, depression and anxiety are examples of the problems caused by such damage.

How close does the calculated figure come to the claim’s actual worth?

The calculated figure is a decent approximation, if it gets calculated after each victim has reached the point of his or her maximum medical improvement (MMI). On the other hand, if the formula gets used before the point where all the victims have reached their MMI, then it does not produce an amount that is close to the claim’s actual worth.

That fact calls attention to the wisdom behind ignoring the efforts of the insurance company to get a claimant to accept a quick settlement. That particular settlement figure lacks all the relevant information and, therefore, falls well below the claim’s true worth.