What is the Difference Between Economic vs. Non-Economic Damages?
February 12, 2026 Posted In Personal Injury
When someone suffers an injury due to another party’s actions, the types of compensation potentially available often falls into two main categories: economic damages and non-economic damages. Economic damages cover measurable financial losses while non-economic damages compensate for the impact of an injury or accident on your life.
What Are Economic Damages?
Economic damages represent measurable financial losses caused by an injury. These damages reflect costs and expenses that can be documented with bills, receipts, wage records, or financial statements. Common examples of economic damages include:
- Medical expenses for emergency care, hospitalization, surgery, and follow-up treatment.
- Costs of physical therapy, rehabilitation, and ongoing medical care.
- Prescription medication and medical equipment expenses.
- Lost wages for time missed from work during recovery.
- Reduced earning capacity when injuries limit future employment.
- Property damage, such as vehicle repair or replacement costs.
Economic damages focus on restoring the injured person financially by covering out-of-pocket losses and income disruption. These damages often form the foundation of an injury claim because they rely on objective documentation.
How Economic Damages Get Calculated
Economic damages rely on clear financial evidence. Medical records establish treatment needs, while employment records show lost income or reduced earning ability. In cases involving long-term or permanent injuries, economic damages may also include projected future expenses. Future economic losses may account for:
- Anticipated medical treatment or surgeries.
- Long-term rehabilitation or assistive care.
- Ongoing medication needs.
- Future income losses tied to permanent limitations.
Accurate calculation requires careful review of current expenses and reasonable projections based on medical and employment evidence.
What Are Non-Economic Damages?
Non-economic damages compensate for losses that do not come with a direct receipt. These damages address the personal and human impact of an injury rather than its financial cost. Common examples of non-economic damages include:
- Physical pain and discomfort.
- Emotional distress or mental suffering.
- Anxiety, depression, or trauma related to the injury.
- Loss of enjoyment of life or inability to participate in activities.
- Loss of companionship or impact on personal relationships.
Non-economic damages recognize that injuries affect more than finances. They account for changes in daily life, emotional well-being, and overall quality of life.
How Non-Economic Damages Get Evaluated
Unlike economic damages, non-economic damages depend on the severity of the injury and how it affects daily living. Factors that influence non-economic damages include:
- The nature and extent of the injury.
- The length of recovery and whether symptoms persist.
- The level of physical pain or emotional impact.
- How the injury affects independence and lifestyle.
Medical records, personal testimony, and statements from family members often help demonstrate these effects.
Why Both Types of Damages Matter
Focusing only on economic damages can undervalue the true cost of an injury. Medical bills and lost wages may show the financial impact, but they do not capture chronic pain, emotional suffering, or long-term lifestyle changes. Non-economic damages fill that gap by acknowledging how injuries affect daily comfort, mental health, and personal fulfillment. Together, economic and non-economic damages provide a more complete picture of loss.
Understanding the Full Value of a Claim
Insurance companies determine a claim’s value by reviewing both economic and non-economic damages through a structured evaluation process. Adjusters begin with documented financial losses such as medical bills, lost income, and projected future treatment, then assess how the injury affects daily life over time. To estimate non-economic damages, insurers often use valuation tools such as the multiplier method or the daily rate method. Under the multiplier method, the adjuster multiplies total medical expenses by a number based on injury severity and recovery length. Under the daily rate method, the insurer assigns a daily dollar amount to pain and suffering and multiplies it by the number of days the injured person experiences symptoms. The method used and the final value depend heavily on medical documentation, treatment consistency, and evidence of long-term impact. However, the multiplier method is most common.