It’s a mistake to assume that the value of personal injury settlements exist in a vacuum, as the amount that’s paid out to people who are owed compensation following an accident changes not according to the merits of the case, but also external economic factors.
In fact there are three critical things which exert pressure upon settlement amounts, so here’s a look at each one in turn, and an exploration of what makes them relevant in today’s financial climate.
The Ripple Effect of Inflation on Settlement Valuations
Inflation – which refers to the overall increase in prices and the corresponding decrease in currency value – impacts every aspect of society when it moves dramatically. We’ve seen this happening in the past couple of years, and the 3.5% price rise reported recently cements that uncertainty and higher costs are here to stay.
Here are the aspects which are at play in determining personal injury settlements:
Cost of Living Considerations
As inflation rises, so does the cost of living. Settlements need to reflect these changes to ensure that recipients can cover their future expenses. For instance, the aforementioned 3.5% annual inflation rate might seem manageable, but over time it chips away at purchasing power.
That’s why getting legal guidance from specialists like those at vaughnandvaughn.com is necessary, since with the right team on your side, you can maximize the compensation received as part of a personal injury claim, and battle inflation woes.
Medical Expenses and Care Costs
Healthcare is particularly sensitive to inflation. An award calculated today must account for possible future healthcare price surges; otherwise, victims risk being undercompensated for long-term care needs. Given that healthcare now accounts for 17% of GDP, the scale of this issue is unambiguous.
Adjusting Life Care Plans
Economic experts often assist by projecting future costs based on inflation trends. This ensures that life care plans incorporated into settlement negotiations remain realistic and fair even as market conditions fluctuate.
Considering Healthcare Cost Trends in More Detail
As mentioned, the rate at which healthcare costs increase can dramatically affect the adequacy of a personal injury settlement over time. Here’s a closer look at why this aspect is increasingly expensive:
Evolving Medical Treatments and Technologies
As medical science advances, newer and often more expensive treatments become available. These advancements can lead to better outcomes but also higher expenses that must be considered in the settlement process.
Benchmarking Against Rising Costs
Healthcare expenses have been climbing steadily, outpacing overall inflation, which is a trend that’s difficult to ignore when calculating settlements for future medical care.
Insurance Coverage Gaps
With insurance plans becoming more stringent, victims may face larger out-of-pocket expenses. Settlements should factor in the potential coverage gaps to prevent financial strain after an accident. Given that gulfs in insurance result in a 17% reduction in the likelihood of individuals reporting good health, it’s a broader problem that the nation needs to contend with.
Wage Stagnation and Settlement Calculations
Wage stagnation is often unnoticed, but can be strong enough to drag down the value of settlement agreements. As wages tread water, the compensation for lost earnings in personal injury cases becomes a contentious point. Here’s why:
Lost Wages and Earning Capacity
Settlements must compensate for both immediate lost wages and future earning potential compromised by an injury. In a market where wages are static, projecting these losses becomes complex.
Incorporating Economic Reality
According to the Bureau of Labor Statistics, average hourly earnings have seen only modest growth over recent years, rising just 0.6% in real terms in 2023. This minimal rise should sharpen our lens when viewing fair compensation for loss of earning capacity.
Consideration of Career Advancement
Stagnant wages can mask career progression opportunities that might have been available to an individual if not for their injury. Settlement negotiations should account for this trajectory.
Final Thoughts
As you can see, the link between personal injury settlements and economic factors is strong and multifaceted, so it’s worth restating that if you find yourself in need of seeking compensation, a good lawyer needs to be in your corner from the beginning.
Interesting Related Article: “What is the Personal Injury Claims Process?“