The Financial Impact of Car Accidents


The financial impact of car accidents to individuals, companies, and our nation is astronomical. Car accidents are the number one leading cause of injury and death in the United States. In 2016, there were 6.2 million car accidents officially reported to law enforcement, 2.4 million people were injured, and over 37,000 people died. An average of almost 100 people die each day in car accidents, which translates to one fatality every 15 seconds.

$871 Billion Dollars

While the loss of life is staggering, the financial impact of car accidents is almost unfathomable. Aggregating all areas of society that are impacted by car accidents is a monumental task. Considerations must be made not just for medical costs, but for property loss, time lost on highways during an accident, loss of productivity, emergency medical services, insurance company costs, lost work and wages, and more.

According to the National Highway Traffic Safety Administration (NHTSA), the total aggregate economic and societal impact in the United States related to car accidents in one year alone totals $871 billion dollars.

One singular city can see over 10,000 accidents per year, just at intersections.  $871 billion dollars is an almost incomprehensible amount and breaking it down might help explain how car accidents financially impact almost every area of life.

The following are some areas that were taken into consideration when calculating how car accidents impact our nation financially:

  • $57.6 billion in productivity losses (household and work)
  • $76 billion in property damage
  • $23.3 billion in medical costs
  • $10.9 billion in legal and court costs
  • $1 billion in emergency services
  • $20.5 billion in insurance administration costs

Other factors resulting from car accidents such as employer costs due to lost wages and productivity, traffic congestion and actual wage losses combine to total an economic and societal impact of $871 billion dollars per year.

Types of Car Accidents That Have the Most Financial Impact

The following types of car accidents create a severe financial impact and account for most car accidents in the United States.

  • Alcohol-Related Crashes. In 2016, over 10,000 people were killed in drunk driving accidents, accounting for almost 30% of all car accidents. Drunk driving crashes alone cost the nation approximately $49 billion per year, an average of $158 for every person in the United States.
  • According to the NHTSA, over 10,000 lives were lost due to speeding-related accidents. Approximately 30% of all car accidents that involve a fatality include some form of speeding. Estimates indicate that car crashes that involved a speeding vehicle cost the nation over $40 billion per year.
  • An AAA Traffic Safety Foundation study determined that 37% of all drivers have admitted to falling asleep behind the wheel at some point. Statistics show that 21% of all fatal crashes involve a drowsy or asleep driver behind the wheel.
  • Distracted Driving. The NHTSA collects information on “distraction-affected crashes” which include any types of distractions to drivers, including cell phone usage. In 2016, 3,450 people were killed in distracted driving accidents, and 391,000 were injured. The NHTSA states that over 660,000 people drive distracted every day on our nation’s highways. Urban areas typically have more incidents of distracted driving and cell phone usage while driving, according to the Property Casualty Insurers Association of America. These distraction-affected crashes due to cell phone usage and other distracted driving issues cost the nation $46 billion per year.
  • Pedestrian and Bicyclist-Related Crashes. Pedestrian and bicyclist-related crashes with motorists were also included and cost the nation $19 billion.

Medical Costs

Car accidents typically result in some form of injury. In 2012, 2.5 million people went to the emergency room due to car accidents, and 200,000 of those people needed to be hospitalized and receive further medical treatment.

The most common types of injuries after a car accident are a neck injury, broken bones, back injuries and traumatic brain injuries (TBI).

Emergency medical treatment, hospital stays, doctor’s visits, medical treatment, prescriptions, and continued physical therapy or rehabilitation all combine to create an astronomical financial impact in the nation due to car accidents.

Additionally, if a person lacks health insurance coverage, the medical costs can be overwhelming and may require some individuals to declare bankruptcy. Oftentimes, victims seek the help of an experienced personal injury attorney to assist them in obtaining compensation for their medical costs associated with a car accident.

The Insurance Research Council’s Auto Injury Insurance Claim Study shows that medical expenses related to victims in car accidents continue to increase much faster than the rate of inflation. According to the NHTSA, $23.3 billion is spent yearly in medical costs associated with automobile accidents.

Property Costs

Almost every car accident results in some type of property damage to a vehicle. While the insurance company should bear the burden of this financial cost, oftentimes a vehicle owner will need to pay for some of the repairs themselves. Costs to repair or replace a vehicle can be substantial and place a severe strain on the personal finances of a car accident victim.

Furthermore, if the owner has a car loan, and the car is considered “totaled” by the insurance company, then the insurance company will only pay out what the car is worth, not the remaining balance on the car loan, or what the owner originally paid for it. The financial cost to insurance companies and owners alike can be quite significant.

Lost Wages

If the injuries suffered from a car accident are serious enough, the victims will be unable to return to work immediately. If time off work is paid, then the company loses financially in lost productivity costs. If time off work is not paid to the victim, then the injured person will suffer a loss of wages either temporarily or permanently.

Oftentimes, after a serious accident, the ability to work is diminished or restricted, and victims are forced to seek alternative work for less income. If the injuries sustained are serious enough, a victim may have to file for social security disability payments, which then impacts the federal government financially.  Either the victim, the company, or the government loses financially when a car accident causes serious injuries.

Increased Insurance Rates

Regardless of who was at fault for a car accident, insurance companies typically increase car insurance premiums and rates for all drivers involved in a collision. While the increase in insurance rates varies depending on the severity and circumstances of the car accident, the estimated average price rise of an insurance premium after an accident is 40%. This price increase is substantial and can leave households unable to afford the premiums for car insurance.

Who Pays?

Car accidents affect all areas of our nation’s economy. While private insurance companies pay approximately 50% of all the costs associated with a vehicle crash, individuals pay increased insurance premiums, legal fees, the cost to repair or replace a vehicle, lost wages, and medical care.

Some states follow comparative negligence law and place the liability on more than one party involved in the accident. This will ultimately reduce the amount of damages the victim is able to receive if they were partially at-fault for the collision.

However, insurance companies and victims are not the only parties that assume a financial burden for car accidents. Companies pay in the loss of productivity and lost wages. The government pays with increased social security disability claims and emergency services. When car accidents cause injuries, the financial impact ripples through every financial sector of our nation.

More Than Just Finances

The highest price someone pays for a car accident is with their life. While the economic and financial impact of car accidents is staggering, even more tragic is the cost of human life.

According to the National Safety Council, while over 4.5 million people were seriously injured in car crashes in 2018, 40,000 people lost their lives each year from 2016 – 2018. Oftentimes, if a person dies in a car accident, their loved ones can have an experienced personal injury attorney seek compensation based on a “wrongful death” claim.

While no amount of money can truly or fully compensate a family in these cases, a “wrongful death” claim will at least provide financial restitution to those who have lost someone due to someone else’s negligence.

Road to Zero Coalition

The National Safety Council has created a Road to Zero Coalition that lays out practical strategies to completely eliminate all roadway deaths by the year 2050. Their report indicates that the benefits of the new technology of fully automated and self-driving cars can help public safety and reduce accidents.

With ambitious goals such as enforcing and strengthening traffic safety laws, supporting more vigorously those who build and design vehicles and roads, and providing new resources for traffic safety researchers, the National Safety Council believes that it is possible to make this nation automobile accident-free.

Are Self Driving Cars the Answer?

According to a McKinsey & Co. study, widespread adoption of self-driving cars could potentially reduce or eliminate 90% of all accidents in the United States, and prevent almost $190 billion in health-care expenses, damages, and save up to 30k lives each year.

Such a widespread embrace of these types of self-driving cars could also potentially reduce auto insurance premiums by up to 40%. While self-driving cars could bring their own set of challenges, only the future will tell if these types of cars save both money and lives.

Seat Belts Save Lives and Money

Perhaps the most useful and inexpensive answer is already available. The NHTSA indicates that $69 billion dollars would be saved every year in injury prevention due to car accidents if everyone wore seat belts. Seat belts can prevent substantial costs in medical care, lost wages, lost productivity and other injury-related expenses.

Financial Impact of Car Accidents and the Future

While the statistics regarding fatalities due to car accidents is distressing. Also shocking is the financial impact that car accidents have on this nation yearly, as the total inches closer and closer to the trillion-dollar mark. With over 2 million American injured each year, and one dying every 15 seconds due to car accidents, it is time to buckle up both proverbially and literally.

Armed with these harrowing statistics, we should hope that the National Safety Council’s Road to Zero Coalition strategies improve our car accident statistics in the future, for both our nation’s financial and personal health.


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