What Is the Difference Between Loss of Income and Loss of Earning Potential?

What Is the Difference Between Loss of Income and Loss of Earning Potential?

You might have suffered injuries due to a car accident, a slip and fall accident, a truck accident, or some other cause. You likely qualify for compensation when you suffer an injury due to someone else’s wrongful conduct. In some cases, a workers’ compensation claim is appropriate. In most cases, however, you need to file a personal injury claim. 

“Loss of income” and “loss of earning potential” are two different measures of compensation based on the work-related consequences of your injuries. If you have a personal injury claim, it is important that you understand the difference between these two terms. 

In a nutshell, ‘loss of income’ represents income you have already lost, while ‘loss of earning potential’ represents money you expect to lose in the future.

Context: Summary of Personal Injury Damages

When you suffer a personal injury, you probably qualify for far more than the money necessary to compensate you for missed work days. You can recover both economic and non-economic damages.

Following is a more complete list of the types of compensation you are likely to qualify for: 

  • Current and future medical expenses;
  • Lost earnings;
  • Loss of earning potential;
  • Incidental expenses such as child care, treatment-related travel expenses, and more;
  • Physical pain and suffering;
  • Emotional distress;
  • The emotional consequences of physical disfigurement (facial scarring, for example);
  • Loss of enjoyment of life;
  • Loss of consortium (intimacy and sexual relations); and
  • Punitive damages. Courts only occasionally award punitive damages, and they are subject to special rules. 

You probably don’t qualify for every item of the damages listed above, but you may very well qualify for some of them.

Loss of Income

For most employees, loss of income includes the loss of:

  • Regular wages or salary;
  • Overtime pay;
  • Bonuses; 
  • Tips, if you are a tipped employee;
  • Sick leave and vacation time that you had to use up because of your injuries; and
  • Any other work-related compensation you lost because of your injuries.

You can also claim the value of benefits provided by your employer, such as private use of a company car. Talk to your lawyer, however, because valuing such items can be tricky.

If You Have a Variable Income

Loss of income is more difficult to calculate if your income is not stable. You might work on commission, for example, or you might own your own business. You can prove your loss of income by first establishing your average daily income, no matter how much it may vary from day to day. Next, you multiply your average daily income by the number of work days you missed. 

It can get even trickier if you have to calculate the loss you sustained by missing a meeting with an important potential client. After all, how do you know whether you would have successfully retained the client had you attended the meeting? A lawyer can help you with this.

Loss of Earning Potential (Diminished Earning Capacity)

Whereas loss of income compensates you for money you have already lost because of your injuries, loss of earning potential compensates you for anticipated future earnings. This measure of damages applies only if you suffer from a long-term or permanent injury. 

Your measure of damages is the amount you expect to lose from the date of your claim until either the date you expect to reach a full recovery or your retirement date, whichever comes first.

The value of your loss of earning potential claim depends on several factors, including: 

  • How much money you were making before your accident;
  • Your career trajectory at the time of your accident;
  • The degree of your disability (whether you can work at all, and if so, how much and in what kind of position);
  • The duration of your disability; and
  • Your age (if you don’t anticipate recovering before retirement).

You will probably need at least one expert witness to help you calculate the total amount.

Let a Personal Injury Lawyer Fight for Your Rights

It can be tricky to prove loss of earnings. It’s likely to be even more difficult to prove loss of earning potential. For the latter calculation, at least, you’re probably going to need not only an experienced personal injury lawyer, but also at least one expert witness. 

Contact a lawyer ASAP to schedule a free initial consultation.