Compensation Adjustment Calculator

When resolving insurance claims or legal disputes, a common point of contention is the 'Time Value of Money'. A settlement offered as a lump sum today is worth more than the same amount paid out over ten years. Conversely, calculating the fair present value of future lost earnings requires discounting those future dollars back to today's terms. This tool is designed for claims adjusters, legal counsel, and beneficiaries to model these scenarios. It features a 'Discount Rate Selector' that allows users to toggle between risk-free rates (conservative) and market-based rates (aggressive) to see how the valuation shifts.

Understanding the sensitivity of a claim's value to the discount rate is critical. A variance of just 1% in the applied rate can alter a long-term payout valuation by tens of thousands of dollars. This calculator brings transparency to the mathematical assumptions underlying settlement offers.

The calculator uses the Present Value (PV) formula for a single lump sum or an annuity stream. For a future lump sum payment:

For a stream of annual payments (Annuity), the summation is used:

Where r is the discount rate and n is the number of periods (years).