Shuman Roy is an entrepreneur, business owner, and musician. He started RoysNoys, LLC in 2013 as a music production and education service company. He also offers small business consulting and advisory services to help businesses get from start-up mode to turn-key operations. Shuman earned his M.B.A from the Stern School of Business in 2001 and has an undergraduate degree from Manhattan College in ...

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Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He has an MBA from the University of South Florida. Joel...

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Reviewed by Joel Ohman
Founder, CFP®

UPDATED: Jul 19, 2021

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Almost everyone in the United States has been involved in an accident, whether “at fault” or not, or knows somebody who has.

We have all heard stories of people making out like bandits on their settlement and people who have gotten the short end of the stick.

Either way, when a lawsuit is filed, there are specific types of compensation, or damages, you may be entitled to collect.

“Damages” refer to any type of injury or property damage you suffer as a result of an accident you are involved in where another party is found to be negligent or at fault.

Keep in mind your right to file a lawsuit may be limited in “no-fault” states.

There are two basic categories of damages, compensatory and punitive.

Compensatory Damages

Compensatory damages are further broken down into both “special” and “general” damages you may have actually suffered.

Special damages are financial compensation for bills you have paid out of your own pocket.

These expenses include your initial doctor visits, medications or any other hospital bills you cover prior to being compensated by whichever insurance company ends up on the hook.

General damages include monetary awards for pain and suffering. These types of damages do not cover specific economic losses in the manner special damages do.

General damages are where the most money can be awarded in court cases and where the most fraudulent insurance claims can take place. Picture the guy in court with the neck brace on!

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Punitive Damages

The second main category of insurance damages is punitive damages. Punitive damages mean just that.

They are a form of punishment for parties who have injured people or property on purpose.

Judges rarely award punitive damages in cases involving insurance companies.

It simply does not make sense to have an insurance company pay them.

The insurance company did not commit the malicious action, and the person who did would not be punished if the insurer had to pay.