If you're driving along, minding your own business and obeying all traffic laws, you're entitled to compensation for property damage and injuries you sustain in the event another driver causes a car accident. Exactly who provides that compensation depends on what state you live in. How much you can expect if the other driver's insurance company is responsible can be a complicated calculation.
There's no formula
The insurance industry as a whole doesn't have one master formula for calculating car accident settlements, but several companies use a software system called Colossus. They input information and the program spits out a number. You can't access Colossus as a consumer, but it can help to have a basic understanding of what goes into the calculation.
Damage to your vehicle
Compensation for damage to your vehicle will be the cost of repairs or replacement parts - unless the cost is more than your vehicle is worth. The insurer may declare your car a total loss in this case, but don't smile just yet. This doesn't mean the insurance will pay for a brand new car. It will pay you the current value of your car, including depreciation. This may not be enough to allow you to buy a new vehicle without some expenses coming out of pocket.
Personal injury compensation
Calculating compensation for injuries is much trickier. This component of a settlement is in addition to anything you receive as a result of a property damage claim. It's based on the amount of your medical bills and any wages you may have lost because your injuries prevented you from working.
A word of caution: You only get one bite at this apple. If you accept a settlement offer before your treatment is completed, you won't be compensated for medical expenses you incur after that date. Rarely can you go back and ask for more money.
Pain and suffering claims
Just as compensation for personal injuries is added to your property damage claim, compensation for pain and suffering is usually added to the cost of your medical bills and lost wages.
Some insurers use a multiplier system to arrive at a compensation number for a pain and suffering claim. They'll multiply your medical expenses and lost wages by one, two, three, or even four or more to arrive at what they believe to be a reasonable settlement for the pain you've experienced. The idea is to arrive at a figure that's in the ballpark of what a jury would award you.
There is typically a correlation between your medical bills and the multiplier used based on the assumption that the more medical bills you incur, the more serious your injury, and more problematic your pain and suffering. For example, a multiplier of only one or two might be applied if the total of your medical expenses and lost wages was $5,000 or less. Or, you might be offered $75,000 if you have $25,000 in medical bills and lost pay and the company uses a multiplier of three.
An insurer will not offer a settlement in excess of the other driver's policy limits, regardless of how injured you are. Your settlement will be capped at the extent of the other driver's coverage. If he only carried $25,000 in coverage that's the most you can receive, even if you have a legitimate $100,000 claim.
There's a way around this, however. Your own insurer will make up the difference - subject, of course, to your own policy limit - if you carry under-insured motorist coverage on your own policy.
No-fault insurance states
Your own insurance company must pay your claim if you reside in a no-fault insurance state, regardless of who caused the accident. This eliminates any claim you may have for pain and suffering unless your injuries are particularly severe. Otherwise, your insurer will only compensate you for lost wages, medical bills, and property damage. Twelve states observe no-fault insurance law as of 2016: Michigan, Florida, New York, New Jersey, Hawaii, Pennsylvania, Kentucky, Kansas, Minnesota, Massachusetts, Utah, and North Dakota.