Anyone who sustains an injury in an accident almost always wonders: how is personal injury compensation calculated? The short answer is: carefully, personally, and often more complex than you might think. In this article, we explain step by step how personal injury compensation is determined, which heads of damage count, and why professional guidance is important.
What exactly is personal injury compensation?
Personal injury compensation is all the losses that arise because someone sustains physical or psychological injury through the actions of another. This includes not only medical costs, but also loss of income, missed opportunities, and non-material damage (compensation for pain and suffering).
Important: the starting point is always that the victim is placed financially in the position as if the accident had not happened.
Step 1: Establishing liability
Before damages can be calculated, it must be established who is liable. Without liability, no compensation.
Liability can arise, for example, in:
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traffic accidents
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workplace accidents
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medical errors
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accidents in public spaces
Only once liability has been acknowledged (or legally established), can the damage calculation start.
Step 2: Inventory of all damage items
Personal injury damages consist of several damage items, which together make up the total amount of compensation. These are broadly divided into material damage and non-material damage.
Material damage (pecuniary loss)
1. Medical costs
All costs that are not (fully) reimbursed, such as:
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deductible
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physiotherapy
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medication
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assistive devices
Future medical costs also count.
2. Loss of income
One of the largest items of damage.
Consider:
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lost wages
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reduced working hours
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loss of career opportunities
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loss of earning capacity for the self-employed
The following are considered:
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income before the accident
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current situation
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future prospects without the accident
3. Costs of assistance and care
For example:
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household help
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informal care by family
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childcare
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adaptations in the home or car
Also free help from family is legally valued.
4. Other costs
Such as:
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travel expenses
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study delay
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extra expenses due to the injury
Everything that can be demonstrated to be the result of the accident counts.
Non-material damage: pain and suffering compensation
In addition to financial damage there is pain and suffering compensation. This is compensation for:
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pain
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suffering
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loss of enjoyment of life
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psychological complaints
How is pain and suffering compensation determined?
Pain and suffering compensation is determined on the basis of:
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severity and duration of the injury
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permanent limitations
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impact on daily life
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comparable previous cases
There is no fixed formula. It is tailored to the case.
Step 3: Medical assessment
In cases of permanent or long-term injury, there is often a medical end state needed. Only then can it be properly assessed:
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what the permanent limitations are
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what future damages can be expected
Without medical clarity, there is a risk of underestimating the damages.
Step 4: Calculate future damages
Personal injury damages often extend beyond today. The following is considered:
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future loss of income
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future healthcare costs
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loss of pension and pension accrual
This is done with calculation models and scenarios. Small assumptions can have major financial consequences.
Step 5: Negotiations with the insurer
The insurer of the liable party will:
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critically assess the damage items
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try to limit the amounts
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sometimes exert pressure to settle quickly
This is exactly where expert legal guidance makes the difference.
Common mistakes when calculating personal injury compensation
❌ Agreeing to a settlement too quickly
❌ Underestimating future damages
❌ Failing to account for loss of career prospects
❌ Not waiting for medical stabilization
Once signed, an agreement is almost always final.
Why a personal injury lawyer is important
A specialized personal injury lawyer:
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maps out all damage items completely
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engages medical and financial experts if necessary
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negotiates with insurers
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prevents underestimation of your damages
The costs of legal assistance in personal injury cases are recovered from the liable party. So this is free of charge for you.
Conclusion: how is personal injury compensation calculated?
Personal injury compensation is calculated by:
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determination of liability
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itemization of all losses
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medical assessment
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calculation of future damages
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legal negotiation
Every case is bespoke. Two seemingly similar accidents can result in completely different compensation amounts.
