How Is a Car Accident Settlement Calculated in California?

car accident settlement

The majority of car accident cases in California are settled out of court. Typically, to resolve such a case, the injured party and the insurance company will get down to serious negotiations. For a favorable outcome, it is important to know how much your claim is actually worth. This will help you to negotiate effectively and ensure you are not taken advantage of—something that will enable you to get a fair settlement. But how is a car accident settlement’s value determined? 

Read on to find out. 

What Is Included in a Car Accident Settlement?

Ideally, the settlement amount you receive should be enough to cover all damages related to the accident. This is why you need to know what is included in a car accident settlement. There are two types of damages you can recover: 

Economic Damages

Also known as special damages, these are the monetary losses suffered as a result of an accident. Economic damages are measurable and can be easily calculated by reviewing records and documents. Economic damages can include:

  • Past and future medical expenses 
  • Costs related to replacing or repairing damaged property 
  • Lost wages and other lost income 
  • Lost business opportunities due to the injuries sustained 
  • Out-of-pocket costs 

Non-economic Damages 

Non-economic damages, or general damages, are the non-monetary losses suffered by a car accident victim. Because these damages are more subjective, it is harder to place a monetary value on the losses. The damages may include compensation for:

  • Emotional anguish
  • Physical pain and suffering 
  • Loss of ability to enjoy life
  • Loss of companionship and consortium
  • Scarring, disfigurement, and permanent physical disability 

When Punitive Damages May Be Awarded 

Punitive damages are designed to punish the defendant and deter others from committing similar wrongful acts. Oftentimes, this kind of compensation will not be awarded in car accident cases. However, you may recover punitive damages if the defendant’s conduct is found to be intentional, malicious, or extremely reckless.

Calculating Damages for a Car Accident Settlement

There is no clear-cut method for calculating the value of a car accident claim in California. Some people use car accident settlement calculators to generate an estimate after they’ve been injured. However, you cannot rely on these calculators to generate an accurate estimate. This is partly because getting an accurate monetary value requires more information than calculators can collect. Similarly, it is important to keep in mind that no two cases are the same. 

Calculating economic damages entails adding together the amounts documented on all the relevant bills and receipts. You also need to take into account issues like lost wages and earning capacity. 

However, when it comes to non-economic damages, the losses can be difficult to quantify. To determine the financial compensation that a victim is entitled to, the non-economic costs are analyzed based on the impact of the accident on the victim’s quality of life and lifestyle. Two commonly used formulas when computing general damages are the multiplier formula and the per diem formula.

Multiplier Formula

In the multiplier method, an insurance adjuster or personal injury lawyer will calculate all of your economic damages. They will then multiply your economic damages by a factor that typically ranges between 1.5 and 5. People who have suffered only minor injuries with minimal economic costs generally earn the lowest multiplier. Those who have suffered extreme injuries and financial devastation can qualify for the highest multiplier. This is because more severe injuries are likely to have a more permanent impact on the victim.

Per Diem Formula

In the per diem method, you are assigned a compensatory value per day of your recovery. In general, your per diem earnings will be close to what your daily income would have been if the accident had not occurred. 

In order to obtain the most accurate estimate of your potential car accident settlement, reach out to a skilled car accident attorney. They will ensure that you are compensated for all possible factors related to your accident.

Factors That Affect the Amount of Settlement 

There are several factors that can impact the value of your car accident claim. Below are some things you need to consider when calculating your potential settlement.  

The Type and Severity of Injuries  

The type and extent of the injuries you suffer in an accident can influence the length of your hospital stay, the medical care required, and whether you will be able to work. Generally, the more serious your injuries are, the higher the compensation you are likely to receive. 

Total Amount of Damages

The insurance company will require that you write a demand letter stating the amount you are seeking to recover. In order to do this, you have to calculate the total amount of damages you have incurred. Oftentimes, you will be entitled to special and general damages. 

In the event that you are awarded punitive damages, this will increase your recovery. 

Available Insurance Coverage 

The amount of liability coverage the other driver carries will also affect how much compensation you get. If your case is worth more than the available liability coverage, you may not recover the total value. This is particularly true if the at-fault party does not have assets from which you can recover the damages beyond the policy limits. 


In California, how much compensation you obtain will depend on whether or not you were partially at fault for the collision. If the accident was entirely a result of someone else’s negligence, you are likely to end up with a large settlement. However, if you were partly responsible, you will collect only part of your damages. 

Tips to Help You Maximize Your Car Accident Settlement

The effects of a car accident can be long-lasting. As such, you need to take the correct steps so that you get the most money from your claim. Here is how to ensure you get the financial compensation you truly deserve: 

  • Familiarize yourself with the dos and don’ts after an auto accident. This will help you avoid making costly mistakes.  
  • Seek medical attention as soon as possible. Seeing a doctor is an important step even if you have not suffered any visible injuries. 
  • Report the accident to the police and file a police report. Also, inform your insurance company about the crash.  
  • Whenever possible, be sure to collect as much evidence as possible at the scene of the accident. This will help you build a strong case. 
  • Keep track of all your expenses. Be sure to store important documents such as your medical bills, prescriptions, vehicle repair receipts, and records of your income in a safe place. 

Work With a California Car Accident Lawyer to Maximize Your Settlement

Calculating the car accident settlement you should receive can be complicated. This is why it is important to have an experienced personal injury lawyer on your side. A knowledgeable car accident lawyer will help you understand what you may be entitled to, negotiate on your behalf, and provide competent legal representation in court if your case goes to trial. Contact our firm today for a free case evaluation.