Anyone who sustains injuries in an accident almost always wonders: how is personal injury compensation calculated? The short answer is: carefully, personally, and often more complex than expected. In this article, we explain step by step how personal injury compensation is determined, which types of damages count and why professional guidance is important.
What exactly is personal injury compensation?
Personal injury compensation is all losses that arise because someone sustains physical or psychological injury caused by another It concerns not only medical costs, but also loss of income, missed opportunities, and non-material damage (pain and suffering).
Important: the basic principle is always that the victim is financially placed in the position as if the accident had not happened.
Step 1: Determining 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 calculation of damages begin.
Step 2: Inventory of all heads of damage
Personal injury damages consist of multiple heads of damage, 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 expenses
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 expenses also count.
2. Loss of income
One of the largest items of loss.
Consider:
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lost wages
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working fewer 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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expected future without the accident
3. Costs for help and care
For example:
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household help
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family caregiving
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childcare
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modifications to 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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additional expenses due to the injury
Anything demonstrably resulting from the accident counts.
Non-material damage: compensation for pain and suffering
In addition to financial loss, there is compensation for pain and suffering. This is compensation for:
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pain
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grief
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loss of enjoyment of life
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psychological problems
How is pain and suffering compensation determined?
Pain and suffering compensation is assessed on the basis of:
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severity and duration of the injury
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permanent impairments
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impact on daily life
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comparable earlier cases
There is no fixed formula. It is case-specific.
Step 3: Medical assessment
In cases of permanent or long-term injury, a medical end state necessary. 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 underestimation of the damages.
Step 4: Calculating future damages
Personal injury often goes beyond today. The following are considered:
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future loss of income
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future care costs
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pension accrual loss
This is done using calculation models and scenarios. Small assumptions can have major financial consequences.
Step 5: Negotiations with the insurer
The liable party’s insurer 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 maximum medical improvement
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 in full
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engages medical and financial experts if needed
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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. For you, this is therefore free of charge.
Conclusion: how is personal injury compensation calculated?
Personal injury compensation is calculated by:
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establishing liability
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itemizing all losses
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medical assessment
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calculation of future losses
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legal negotiations
Every case is unique. Two seemingly similar accidents can result in completely different compensation amounts.
