Lost wages after a car accident: what you can claim and how to prove it

What counts as lost income#

Lost income is part of your economic damagesEconomic damages. Losses with a receipt or a paycheck behind them: medical bills, lost wages, repairs and other out-of-pocket costs. Glossary. It is meant to cover what you actually lost, not only your base pay. A claim may include:

• Wages or salary for the days and hours you missed, including time off for medical appointments and therapy.
• Overtime, tips and commissions you would have earned, if your records show you usually earned them.
• Bonuses you lost because you could not work or meet a target.
• Sick days, vacation and paid time off you had to use. Many claims include them because you lost something of value, though insurers and states do not all treat them the same way.
• Benefits that stopped while you were out, such as an employer's retirement contribution.
• Lost business income if you are self-employed, such as cancelled contracts or jobs you had to turn down.

Proving lost wages as an employee#

Two things must be shown: how much you earned, and that the injury, not something else, kept you from working. Each document below covers part of that.

The employer letter is often the key document. It is usually on company letterhead, signed by a supervisor or someone in payroll or human resources, and lists your job title, pay rate, normal schedule, the dates you missed and any paid leave you used. Your insurer may send its own form for your employer to fill in instead.

Ask your doctor to put any time off or work limits in writing at each visit. A note that says "no lifting over 10 pounds for four weeks" explains why a warehouse worker could not return, even if they felt able to walk around.

Self-employed, gig and commission workers#

Without an employer letter, the proof has to come from your own records. Insurers look closely at these claims, so organized paperwork matters more.

• Tax returns for the last two or three years, including any business schedules, to show your normal income.
• Forms 1099 and platform earnings statements from rideshare, delivery or freelance apps, which many platforms let you download.
• Invoices, bank deposits and booking calendars that show regular work before the crash.
• Cancelled jobs: emails or messages from clients who cancelled, and work you had to turn down.
• A profit-and-loss statement prepared by you or an accountant, if your income varies.

Expect questions about business expenses. An insurer will want to know what you would have earned after costs, not just your total sales. Seasonal work also needs context: a landscaper injured in April should show income from earlier springs, not the winter months.

People who do unpaid work at home also have losses. The cost of paying someone for childcare, cleaning or yard work you can no longer do can often be claimed as an out-of-pocket expense.

Past wages, future wages and earning capacity#

Lost income is usually split into three parts, and each needs different proof.

Loss of earning capacityLoss of earning capacity. A lasting reduction in your ability to earn money because of an injury. It looks at what you could have earned, not only at the paychecks you have already missed. Glossary is about ability, not paychecks. California's jury instruction tells jurors to compare what the injured person could probably have earned without the injury with what they can still earn with it, and it adds that the injured person does not need a work history. That matters for students, young adults, stay-at-home parents and people who were between jobs.

These claims usually need expert support. A doctor describes permanent limits, a vocational expert explains which jobs remain possible, and an economist may put future losses into today's dollars.

Sick leave, PTO and job protection#

While a claim is pending, most people need income to keep coming in. Several sources may help:

1. Sick leave and paid time off from your employer. Using it keeps you paid, and the leave used can be listed as part of the loss.
2. Short-term or long-term disability insurance through work or a private policy. Some disability insurers have a right to be repaid from an injury settlement; see medical liens and subrogation.
3. The Family and Medical Leave Act. If you and your employer meet its eligibility rules, it allows up to 12 workweeks of unpaid, job-protected leave in a 12-month period for a serious health condition.
4. Workers' compensation, if the crash happened while you were working. It has its own rules; see company vehicle accidents.
5. State disability programs. A few states run their own short-term disability insurance; your state labor department can tell you whether yours does.

PIP wage benefits in no-fault states#

In no-fault states, personal injury protectionPersonal injury protection (PIP). Coverage under your own policy that pays medical bills and some lost income after a crash, whoever caused it. Glossary pays part of your lost income from your own policy, whoever caused the crash. State law sets the percentage of income it pays and the limits.

New York. Basic no-fault coverage of $50,000 per person pays 80% of lost earnings, up to $2,000 a month, for no more than 3 years after the accident. It also pays up to $25 a day for other reasonable and necessary expenses, for up to a year. A no-fault claim must be filed within 30 days after the accident. New York's law does not let you sue the at-fault driver for the losses no-fault covers, but lost earnings above those benefits can be part of a claim against that driver.

Florida. PIP pays 60% of lost gross income and loss of earning capacity, alongside 80% of reasonable medical expenses. Both come out of the same $10,000 limit, so a large hospital bill can leave little for lost wages.

Minnesota. PIP is required at $40,000 per person, half for medical expenses and half for income loss and other non-medical benefits.

Some at-fault states also add PIP to policies. Texas, for example, includes PIP of at least $2,500 per person in every policy unless the policyholder rejects it in writing, and it pays some lost income as well as medical bills. Our guide to who pays medical bills explains how PIP fits with other coverage.

Lost wages in the rest of the claim#

When the claim is ready, lost income goes into the demand letter as its own section: a short table of the dates missed, hours lost and pay rate, with the employer letter and tax records attached.

The duty to mitigateMitigation of damages. Your duty to take reasonable steps to limit your losses after an injury, such as following medical advice. Losses you could reasonably have avoided may not be recoverable. Glossary applies here too. If your doctor clears you for light duty and your employer offers it, an insurer will argue against wages lost after that date. If no suitable work was available, a letter from your employer saying so helps.

Taxes are a separate question. Whether the lost-wage part of a settlement is taxed depends on whether the claim is for a physical injury and how the settlement is worded; see are settlements taxable.