1. What is a Present Day Value Calculator for Workers Compensation?

Definition: This calculator determines the current worth of future workers compensation payments by accounting for the time value of money.

Purpose: It helps insurance professionals, attorneys, and claimants evaluate the present value of future compensation payments.

2. How Does the Calculator Work?

The calculator uses the formula:

Where:

• \( PV \) — Present value (USD)
• \( FV \) — Future compensation value (USD)
• \( r \) — Discount rate (decimal)
• \( t \) — Time until payment (years)

Explanation: Future payments are discounted back to present value because money available now is worth more than the same amount in the future.

3. Importance of Present Value Calculation

Details: Accurate present value calculations ensure fair settlements, proper reserve setting, and informed financial decision-making.

4. Using the Calculator

Tips: Enter the future payment amount, discount rate (default 0.05 for 5%), and time until payment in years. All values must be > 0 (except rate can be 0).

5. Frequently Asked Questions (FAQ)

Q1: What discount rate should I use?
A: Typically 3-7% (0.03-0.07). Check state regulations or use the risk-free rate (e.g., Treasury bonds).

Q2: How does time affect present value?
A: Longer time periods result in lower present values due to greater discounting effect.

Q3: Can I calculate multiple future payments?
A: This calculator handles single payments. For multiple payments, sum the PV of each payment.

Q4: What if my discount rate is a percentage?
A: Convert to decimal (e.g., 5% = 0.05) before entering.

Q5: Why is present value important in workers comp?
A: It ensures fair lump-sum settlements that account for investment opportunities and inflation.