If you’re ever in an accident, it is very helpful to know how insurance companies determine the amount of compensation you’ll receive. Many companies use a formula, like BASE, to help determine the personal injury portion of the settlement. This gives them a starting point to which the property damage is added.
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The BASE formula, which stands for Baldyga Auto Accident Settlement Evaluation, was developed by Dan Baldyga, an insurance expert. While not all companies use this particular formula, it is helpful for you, the consumer, to understand how a formula like this works as it gives a general idea of the compensation you might receive after an accident.
What is the BASE formula?
The most difficult part of determining an injury settlement is the compensation for pain and suffering. Doctors and hospitals provide bills for their service, so they are easy to quantify. It’s much harder to put a price tag on spending several days hurting because someone ran into your car.
The BASE formula allows companies to use a standard process to come up with an amount that will pay both medical expenses and compensation for pain and suffering.
The BASE formula is based upon all the costs incurred in three areas. The first is medical expenses, which include ambulance, hospital, x-ray, doctor, and prescription bills. The second includes any wages lost because you missed work, even if you took sick leave and didn’t actually lose any money. The last is rental car costs.
Once all these amounts are added up, the total is multiplied by one of four factors. The factors are quantified as: low = 2, middle or core = 3, mean = 3.5, and premium = 4. Which factor is used depends on the circumstances of the accident, including the reputation of the drivers.
How do I know which factor will be used?
Once the total expenses are known, the insurance company evaluates the facts about the accident to determine which factor the settlement will use. This is a more subjective judgment call. Many variables affect this decision and will vary depending on the company. For an independent rating of insurance companies, see Standard and Poor’s.
Most companies begin the assessment process by assigning the settlement the core factor, meaning that the costs will be multiplied by three. That number will be the injury part of the settlement. However, the facts of the case will be examined and can raise or lower the factor used.
How severe were the injuries? Will you fully recover from them? Are you still in pain? The more severe and painful the injuries, the more likely the company will use the premium factor. This is also more likely if the person at fault was breaking the law when the accident occurred or has a history of reckless driving. If he has a criminal history, you are more likely to merit a higher factor.
If you are highly respected and have a clean criminal and driving record, this will also tip the scales in your favor. Elderly people also tend to receive more consideration, as do young mothers whose children were in the car.
However, if you fail to follow through with the therapy or other treatment plan prescribed for you, you are more likely to be assigned the low factor. If you have a bad driving record, this will also negatively affect your determination, even if you didn’t cause the wreck. If the other driver is a well-respected member of society who’s never made a mistake like this, it will also tip the scales to a lower factor.
How is the final number determined?
Once the insurance company decides which factor to use, the total medical damages is multiplied by the factor. If there were $5,000 in medical bills and lost wages, and the facts of the accident merit a mean factor, which is 3.5, the BASE formula will yield an amount of $17,500.
This is not the final settlement number as the BASE formula doesn’t calculate property damages. If the wreck caused $2500 in damages to the car, the insurance’s settlement number would be $20,000. This gives the insurance company a starting point for negotiations for a final settlement.
Visit Cornell University Law School’s Legal Information Institute’s website for more information about car insurance laws in your state.
Being in a car accident is very upsetting. Knowing how the insurance companies calculate the settlement amounts will help ease you mind by taking one unknown out of the equation.
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