Intro to Paralegal Studies Practice Exam 2025 - Free Paralegal Practice Questions and Study Guide

Compensatory damages are designed to restore the plaintiff to the financial position they were in before the harm occurred. They are intended to cover actual losses, which can include medical expenses, lost wages, property damage, and pain and suffering. The primary goal is to make the injured party whole again, compensating them for the direct impact of the defendant's actions.

In contrast, punitive damages serve a different purpose. They are not meant to compensate the plaintiff for losses but rather to punish the defendant for particularly egregious behavior and deter similar misconduct in the future. Because punitive damages are focused on punishment and deterrence, they can be awarded in addition to compensatory damages and are often significantly higher, but there is no strict rule that they always must exceed the amount of compensatory damages. Therefore, the correct option emphasizes the distinguishing characteristic of compensatory damages as restorative in nature, which is central to understanding their role in the legal system.