A car accident is one of the most distressing things that can happen to you. Car accidents lead to emotional trauma, injuries, and, most terrible of all, death. And there is the compensation aspect as well.

After an accident, those involved will either have to pay for damages and medical expenses or demand payment, depending on who’s to blame for the incident.

These expenses are also called economic damages. In 2023, deciphering the expenses included in economic damages is no easy feat.

However, it is vital to understand how insurance companies calculate it and its impact on the eventual insurance settlement amount. 

How Car Accident Settlements Work

You must understand settlement calculations to see how economic damages influence your settlement.

Insurance settlements pay accident victims for losses and damage they’ve suffered during a car crash. There are two types of damage settlements, namely economic and non-economic:

How Car Accident Settlements Work

Economic Damages

Economic damages equal financial losses. These losses must be the direct result of an accident to be considered in a settlement. They include the following:

  • Medical expenses: This includes hospital and doctor’s bills, money for surgeries and medications, and funds to pay for out-of-hospital treatment. These expenses must be directly related to the accident.
  • Lost salary: If you’re in an accident and you sustain injuries that render you unable to work, you may be able to claim for lost income. However, you can only claim if the other party is to blame for the accident. 
  • Property damage: Economic damages cover the cost of replacing vehicles involved in the accident. It also includes other damage sustained during the accident (property damage). 
  • Out-of-pocket expenses: This refers to transport expenses (rental car), home repairs (if damaged during the accident), and other costs incurred due to the accident.

Non-Economic Damages

Non-economic damages are more difficult to quantify, but they still play an important role in insurance settlements. These are far less tangible damages and include:

  • Pain and suffering: This refers to compensation for physical pain because of injuries. It also includes emotional distress and psychological trauma. 
  • Loss of consortium: The loss of consortium means losing the benefits of a relationship. For example, if you lose your spouse or partner in an accident, you can legally claim compensation for the impact this has on you and your family. The same goes for your spouse or partner being severely injured and unable to resume work. 
  • Loss of fulfillment: If you can no longer indulge in hobbies or play sports due to injuries sustained in an accident, you can claim compensation. Loss of fulfillment or loss of enjoyment of life is not a tangible form of economic damage but forms a real part of insurance settlements. 
  • Disfigurement: Accidents often leave scars and cause disfigurement. You can claim for this, depending on fault determination.

Calculating Economic Damages

Calculating the settlement for economic damages is straightforward:

Medical Costs

If you want to claim for medical expenses, you must provide proof of medical bills related to treatments for injuries due to an accident.

This includes hospital bills, surgeon fees, ambulance costs, medication and rehabilitation funds, and other related expenses.

Diminished or Lost Salary

Calculating lost income means establishing the amount you would have earned had you not been injured in the accident.

You must provide documentation proving a diminished or lost income, including pay stubs and tax records. You can also ask your employer for a letter confirming the days you missed work.

Property Damage

Property damage is ascertained based on the cost of repairing or replacing your vehicle. You must obtain estimates or quotes from auto repair shops or replacement cost receipts to claim.

You can also claim out-of-pocket expenses if you have to rent a car or repair your home after an accident. 

Impact Of Economic Damages On Your Settlement

Impact Of Economic Damages On Your Settlement

 The most important points to consider when calculating the impact of economic damages on your settlement include the following:

  • The foundation of your claim: Economic damages are the starting point for any claim. They are easy to calculate and prove and form the baseline for settlements.
  • Negotiation and settlement: The extent of economic damages directly influences negotiations with the at-fault party’s insurance company. You will likely receive a higher settlement if you convincingly prove or demonstrate your losses. 
  • ·Legal counsel: If you’re unsure of how to negotiate with an insurance company, it would be wise to consult a personal injury attorney. They can assist you in calculating economic damages and guide you through any legal processes. Doing this also increases the chances that you will get a fair settlement.

Other factors also influence insurance settlements, including liability and state-specific laws. Remember this because economic damage calculations often rely on these extra factors.


In 2023 and beyond, economic damages will continue to be crucial in determining the outcome of a car accident settlement.

With a thorough understanding of damage calculations and their impact on settlement negotiations, you will ultimately receive a fair payout for the losses you’ve suffered due to an accident.

And, while economic damages form only one part of the settlement, it is the part that will help you overcome financial difficulty after an accident.

Every car accident is different. The circumstances won’t correlate with others, and the details will vary. However, every time, these factors will play a determining role in the final settlement payment.

Also, while an insurance settlement won’t atone for losing a loved one, it can help support your family. The hardest part of insurance settlements is the emotional fallout and loss.

If possible, surround yourself with friends and family while dealing with an insurance settlement for non-economic damages.

Only correspond with your insurance company and avoid conversing with the at-fault party. The insurance provider will ensure you get your rightful settlement after considering all the factors.