How Self-Employed Car Accident Victims Can Be Compensated for Lost Income

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Key Points:

  • When you’ve been injured in a car accident, you’re entitled to full compensation—including lost income— from the at-fault driver’s insurance company.
  • Self-employed individuals may face more challenges than salaried employees when proving a claim for lost income because they don’t receive a regular paycheck.
  • If you’re self-employed, you may need to submit documentation from multiple sources to prove lost wages, lost business opportunities and good will, and lost earning capacity.
  • An attorney who has experience representing small business owners and self-employed individuals can save you time and do the work of collecting evidence, so you can focus on your business and physical recovery

When you’ve been hurt in a car accident, you can quickly become overwhelmed as medical bills and vehicle expenses pile up. Your injuries may also prevent you from being able to work, making it difficult to pay day-to-day costs such as groceries, rent, and utilities. If you work for a company, you may have paid leave or sick days to help offset costs.

If you’re self-employed, however, you don’t have financial benefits to rely on and may face more challenges when seeking full compensation from the insurance company. To make you whole after an accident, full compensation must include lost income, but proving how much income you’ve lost (or will lose in the future) is not as straightforward when you don’t receive a regular paycheck.

Fortunately, the at-fault driver’s insurance company has the same legal duty to compensate victims for lost wages regardless of their employment status. Even though proving costs can be more challenging for those who are self-employed, this guide shows you how to overcome obstacles so that you can fully recover your lost income claim.

Car Accidents Often Impact the Self-Employed

Depending on the severity of your injuries, you may be unable to work in the aftermath of a car accident. In some situations, victims are not able to work for a long time—or, even worse, may be left with a permanent disability. If your injury leaves you unable to perform a basic task that’s essential to your work, your entire business can be impacted, especially if you’re a sole proprietor with no employees.

For many self-employed people, no work means no income to run their business, including rent, equipment, or other expenses required to continue operating. In addition, while you’re unable to run your business or perform your tasks, your customers may hire someone else to meet their needs, which can mean lost opportunities for future income. These kinds of losses may cause a self-employed individual to face the possibility of having to close their business and permanently lose their income.

Self-Employed Individuals Who Can Experience Challenges with Auto Insurance Companies

Salaried employees are not the only ones who can lose income after a car accident. Self-employed individuals can also lose income and are entitled to receive compensation for lost wages from the at-fault driver’s insurance company. Before filing an insurance claim, you should understand the differences between an employee and an individual who is self-employed.

An employee:

  • typically works under the direction and control of one company
  • works hours set by the employer
  • receives a regular paycheck and worker’s compensation benefits
  • is protected by federal and state employment laws

Self-employed people:

  • set their own pay rates, hours, and work conditions
  • often work out of their own home or office
  • aren’t eligible for worker’s compensation or other benefits
  • are subject to different tax requirements

If you’re self-employed, you may be a freelancer, independent contractor, or consultant who performs work for multiple people or businesses. You may be a small business owner, or sole proprietor, who either operates alone or with the help of employees. No matter your title, however, all self-employed individuals face extra challenges when trying to prove they deserve lost income from the insurance company.

Types of Income Self-Employed Individuals Can Lose After a Car Accident

When you’re injured in a car collision, you have the right to receive compensation for the total cost of the accident, including lost wages. “Lost wages” is a general term that encompasses all the income and profits you would have earned if you hadn’t been hurt.

If you’re an employee, calculating lost income can be relatively simple and proven by showing your pay stubs and tax records. Employees can also show their changed work status by having a supervisor or boss testify they’ve missed work or can no longer perform their job because of the accident.

For those who are self-employed, however, proving these types of damages can be complicated and involve gathering documentation from a variety of sources. Compensation should include the loss of direct wages, which means the money you were not able to earn from the time of the accident until you recovered. You can also claim damages for lost business opportunities and good will, which includes contracts and potential customers you may have lost because you were unavailable.

If your accident caused severe injuries that affect your ability to perform work in the future, you are also entitled to compensation for lost earning capacity. As opposed to lost income or wages, which are special damages the plaintiff must establish with reasonable certainty, lost earning capacity involves a different standard of proof. In short, recovery for lost earning capacity is not what amount of money is a probable loss but what amount is fair compensation for the reduced ability to work in your chosen field.

In other words, lost earning capacity involves damages that naturally flow from the severity of your injury rather than from quantifiable out-of-pocket expenses. For example, if you’re a contractor whose work involves heavy lifting, you may lose earning capacity if you suffer a spinal injury during a car accident.

What Documents Are Needed to Prove Lost Income

If you’re self-employed, you will likely need to gather several types of documentation to prove your lost income. Insurance companies will be quick to challenge what you submit and may require other forms of verification to support your claim.

Evidence you can submit to prove lost income and business opportunities may include:

  • Proof of your business registration with the state
  • Current and past income tax documents
  • Current and upcoming work contracts
  • Checking account statements
  • Correspondence from existing or potential customers, business invoices, and receipts
  • Medical records and other documents that reflect your injuries/inability to work

How much documentation is required to prove your lost income claim can vary. If your business or workflow has been steady over time, you may be able to calculate your damages using previous tax returns.

However, if your work involves growing profits, an increasing workload, or other irregularities, you will need to provide evidence from multiple sources to prove your claim. In some situations, you may need to hire an expert such as a forensic economist to accurately calculate your damages.  

How Auto Insurance Companies Pay Out Lost Income to Self-Employed Individuals

In many car accident claims where liability is clear, insurance companies will offer a quick, lowball settlement to try to avoid paying full compensation. These early offers may cover vehicle damage or medical costs but often fail to account for other kinds of damages. In fact, insurance adjusters typically ignore the issue of lost income unless the victim specifically raises it during settlement negotiations—even though you can’t calculate the total cost of the accident without it.

For self-employed victims, it may take more time to gather all the evidence necessary to prove lost income, opportunities, or earning capacity. As discussed, proving lost income to an insurance company can include documentation of wages over a specific period, work contracts, commissions, and other types of evidence. The carrier will only pay damages you can prove, so you or your attorney must present documentation of all your losses before you can recover the total cost of your accident.

Because it can be harder to prove lost income when you don’t have the benefit of consistent paychecks from an employer, the insurance carrier may be more likely to question your evidence. Some adjusters may even be biased and believe that self-employed individuals are not as entitled to lost income compensation as regular employees. Insurance companies are always quick to jump on any bit of information that can minimize compensation, so self-employed claimants should make sure their attorneys have strong evidence of lost income before they begin settlement negotiations.

Why You Need a Car Accident Lawyer If You’re Self-Employed

If you’re self-employed and recovering from a car accident, then you already have enough on  your plate. Investigating and collecting the evidence needed to support your insurance claim takes time—time that you don’t have because you’re trying to keep your business running while making ends meet.

Gathering the extra documentation necessary to prove a lost income claim when you’re self-employed is especially difficult which is why you should consider hiring an experienced lawyer. Experienced attorneys can save you time and do the work of collecting evidence, so you can focus on your business and physical recovery.

The lawyers who represent you should have a history of helping small businesses and self-employed people recover compensation after an accident, the knowledge required to build a strong claim, and the ability to negotiate full compensation in an insurance settlement.  

Consultations Are Free at The Millar Law Firm

If you or a loved one has suffered an injury in a car accident and is self-employed, make sure you seek the advice of an experienced personal injury lawyer. Our attorneys have been helping small business owners just like you recover compensation since 1993. Call The Millar Law Firm today at (770) 400-0000 or contact us online to set up a free consultation with one of our attorneys.


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