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Difference Between Loss of Income and Loss of Earning Potential?

Difference Between Loss of Income and Loss of Earning Potential?

You can incur a variety of damages after suffering an injury, including medical expenses and property damage. If your injuries disable you from working, you could experience a number of additional losses.

For instance, you may need to take time off from work after your accident. And you may have to work reduced hours or take light duty until you fully recover. In some cases, you may never regain your ability to work as you did before your injuries. The damages you incur due to these disabilities can take many different forms.

Types of Income Losses Due to a Personal Injury

Suppose that you injure your back in a slip and fall accident. Whether you work a desk job or perform manual labor, your bad back will probably impact your ability to perform your work activities. You could incur three types of losses as a result of this inability to work:

Loss of Income

Loss of income occurs when you are unable to earn income that you were certain to have earned before your accident. These losses involve no speculation. You can multiply your wages by the number of hours you missed to calculate your losses. Suppose, for instance, that you missed three days of work after breaking your leg in a car crash. Your lost income is the wages you would’ve earned if not for your injury.

If you are self-employed, your income losses equal the amount of money you would have earned over the time you were unable to work. Thus, if you had to turn down a project worth $1,000 due to your injuries, that amount represents your lost income.

Lost income can cover both past and future losses. For example, you would be covered if you knew you would miss five days of work for knee surgery to repair damage caused by your car accident. This is true whether the surgery already happened or is scheduled for six months in the future.

Loss of Earning Potential

Loss of earning potential also relates to future income losses. But rather than focusing on specific time missed from work, these damages focus on how your injuries diminished your ability to earn a living. Typically, this happens through some form of long-term or permanent disability that forces you to reduce your working hours, change jobs, or retire from working altogether.

A back injury might ruin your career as a long-haul trucker. If you cannot sit comfortably for eight hours or longer to drive your truck, you will need to look for different work. But all the alternate jobs for which you are qualified might pay less. As a result, you might face a significant loss of earnings over your remaining work life.

For example, the trucking company could offer you a job as a short-haul trucker or a dispatcher at reduced pay. Your loss of earning potential will be the difference between your pay as a long-haul trucker and your pay in an alternate job over the rest of your career.


Disability is a slightly different concept. Your damages due to an injury include both economic and non-economic losses. Loss of income and loss of earning potential are economic losses because they have a direct financial impact you can calculate.

Non-economic losses refer to the intangible ways your injuries diminish your quality of life. You cannot calculate the cost of these losses. Instead, you have to infer their value based on the impact of your injuries on your life.

Disability is a form of non-economic loss. It refers to the reduced quality of life that comes from:

  • Not having the satisfaction and self-worth that comes from working
  • Losing the independence provided by your income
  • Needing to rely on others for financial support

An insurance adjuster or jury is supposed to assess a fair amount of non-economic losses based on the severity of your injuries. More serious injuries tend to diminish your quality of life more than minor ones. Thus, paralysis or an amputation would justify greater disability damages than a herniated disc.

Adding Up Your Losses

These losses are not mutually exclusive. In most cases, you will have a claim for all three types of losses. Take the case of a back injury. You will miss some time from work, change your job duties, and suffer chronic pain for the rest of your life. These losses represent losses of income, earning capacity, and disability.

Learn the Value of Your Claim

You need to understand the value of your claim so you can make informed decisions about your case. An experienced injury lawyer can evaluate your losses and help you understand how much you can expect to recover. Contact Silberstein, Awad & Miklos for a free consultation to discuss the compensation you can seek for your injuries.