A serious injury can lead to both financial and personal losses. In a personal injury claim, these losses are generally divided into economic and non-economic damages. Economic damages cover measurable financial losses, while non-economic damages address losses such as pain and suffering and emotional distress.
Loss of income and loss of earning potential are both forms of economic damages. Understanding the difference can help you determine how an injury may affect the value of your personal injury claim.
What Is Loss of Income?
Loss of income, often called lost wages, generally refers to money you would have earned if your injury had not prevented you from working. It usually covers the period between the accident and your return to work or the resolution of your claim.
For example, suppose you normally earn $1,000 per week and cannot work for six weeks because of your injuries. Your loss of income may include the $6,000 in wages you missed during that period.
Loss of income may include more than regular wages. Depending on the circumstances, it could include:
- Salary or hourly wages
- Overtime pay
- Commissions
- Bonuses
- Tips
- Certain employment benefits
- Lost business income for self-employed individuals
Pay stubs, tax returns, employment records, bank statements, and letters from an employer may help establish how much income you lost.
What Is Loss of Earning Potential?
Loss of earning potential, also known as loss of earning capacity, concerns the effect an injury may have on your future ability to earn money. Rather than focusing on income you have already missed, it considers what you could reasonably have earned if you had not been injured.
For example, a construction worker who suffers a permanent back injury may be able to return to work but no longer perform physically demanding jobs. If the worker must accept a lower-paying position, the difference in expected future earnings could form the basis of a loss of earning potential claim.
These losses are particularly important when an injury results in permanent disabilities or long-term physical or cognitive limitations.
How Is Loss of Earning Potential Calculated?
Calculating future earning losses can be more complicated than determining lost income because it requires estimating how an injury may affect your career over time.
Factors that may be considered include:
- Your age and health before the accident
- Your occupation and employment history
- Your education, training, and professional skills
- Your earnings before the injury
- Opportunities for raises, promotions, or career advancement
- The severity and permanence of your injuries
- Medical restrictions affecting your ability to work
- Whether you can return to your previous occupation
- Your expected remaining years in the workforce
Economic or vocational experts may sometimes be used to evaluate these factors and estimate the financial impact of an injury over a person’s working life.
Can You Recover for Both Lost Income and Lost Earning Potential?
Depending on the circumstances, you may be able to seek compensation for both lost income and reduced earning potential. The two categories compensate for different financial consequences of an injury.
For instance, imagine you miss three months of work after a serious car accident and then return to a lower-paying position because of permanent physical limitations. Your claim could potentially account for the income lost during those three months as well as the difference between what you were expected to earn in the future and what you can now reasonably earn.
However, you generally need evidence connecting these losses to the accident and your injuries. Future losses must also be supported by reasonable evidence rather than speculation.
Protecting Your Right to Seek Compensation After an Injury
The financial effects of a personal injury may continue long after your initial medical treatment ends. Missing several weeks of work can create immediate financial pressure, while a permanent injury could affect your income for years.
Keeping employment records, medical documentation, tax returns, and other evidence can help demonstrate how an accident affected your ability to work. A personal injury attorney can also evaluate your current and future financial losses and explain which forms of compensation may be available.
Contact an Arizona Personal Injury Lawyer at Feller & Wendt, LLC for a Free Consultation
If someone else’s negligence caused your injuries in Arizona, Feller & Wendt, LLC can help you understand your legal rights and options for pursuing compensation. Contact us today to schedule a free consultation with an Arizona personal injury lawyer and discuss your case.
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