What You Need to Know About The Insurance Claim Process
- Insurance 101
- What You Need to Know About The Insurance Claim Process
While paying insurance premiums is a general fact of life, that doesn’t mean you want to find yourself in a position where you need to act on them. Like it or not, accidents happen. If you need to file a claim on your auto or your home insurance policy, you could be concerned if you’re not familiar with the process.
If you’ve ever wondered, how insurance claims work, you’re not alone. This guide is going to help break down the key elements of the insurance claim process you need to know before you can expect a payout on your policies.
How Do Insurance Claims Work?
An insurance claim is a request filed by a policyholder to a provider asking for compensation for a covered loss. The insurance company will then review the claim, and they can approve it and issue an eventual payout after investigating it, or they deny the claim.
There are a variety of different insurance types – auto, homeowners, renters, life, business owner and so many more – and each of them has a different claims process when you’ve suffered a loss. While the process may not be the same across all of your different policies, there are a few common threads of the insurance claims process you can keep in mind as a guide to help you through it.
If you’ve experienced damage or injury you believe may be covered by your policy, the first step is always to review the details of your coverage. The more you understand about your rights, the more successful you may be in filing a successful claim.
What Does It Mean to File an Insurance Claim?
Filing an insurance claim usually involves filling out a proof of loss form, which outlines the damage you’ve incurred and the compensation you seek from your insurer. You’ll usually need to provide dollar amounts, and you can also include pictures or videos of the damage if applicable.
To file a successful insurance claim, it’s crucial to understand your policy. Know your coverages, deductibles, and limits. You don’t want to find out that your loss isn’t covered or your damage amounted to less than your deductible after you file. The insurance company would still record it, and you wouldn’t receive any reimbursement.
Depending on the damage you experience, you’ll either want to file an auto, home, or liability claim. While there are minor differences in the claims process with each one, they all generally follow the same format.
What to Expect in the Insurance Claim Process
Filing an insurance claim can be a complicated and somewhat confusing process. There’s no one-size-fits-all outcome, and how your insurance claim is handled largely depends on the fine print in your policy.
In most cases, these steps represent the general framing and timeline of filing a claim with your insurance company to help guide you through the process. To help, here are five basic tips for filing a successful insurance claim and what to expect from the process.
1. Communicate With Your Insurance Company
The moment you’ve suffered a loss, regardless of whether or not you’re sure it’s covered under your policy, you should communicate the details to your insurance company. While you may not ultimately decide to file a claim, it’s extremely important to maintain constant contact with your insurance agent.
Not only can your provider help you understand the finer details of your policy during the insurance process, but there may be strict rules regarding the amount of time you have to file the claim at all.
For instance, you may have only a day or two to file a renters insurance claim after you’ve experienced a loss. But, you may have over a year to file a liability claim. The time frame you have to file an auto insurance claim varies by state and by company. Regardless, it’s almost always best to contact your insurer as soon as possible after you’ve experienced a loss.
Also, your insurer may want to see a police report when it comes to car accidents and theft claims (whether it’s home theft or auto theft). Be sure to contact the relevant authorities when you need to after you’ve experienced a loss.
2. Fill Out and Organize Your Paperwork
After you’ve officially filed a claim with your insurance company, you may be required to fill out forms or give a statement regarding the accident or loss. These steps will help your insurance company determine the exact details surrounding the peril and decide to what extent your policy covers the damage or injuries.
In some cases, this stage may involve the process of sharing photographs of the accident or damages. Especially when it comes to property damage, it’s important to document as much as you can so you can present it as evidence to your insurance company. Taking photos and videos of what happened is extremely useful, as well as utilizing a home inventory list.
3. Have Your Damages Appraised
This is the stage where most insurance companies deploy an adjuster or a third-party contractor to assess the full extent of the damages you’ve reported. Your adjuster may want to speak to relevant witnesses and parties, especially in a liability or auto claim, so they may ask you for that contact information.
If you’ve filed an auto insurance claim, this part of the insurance claim process may involve coordinating with a local mechanic or body shop instead of having someone issued to conduct the repairs.
In a home claim, the adjuster will inspect the damage themselves. They’ll need to visit your property. They’ll ask you questions, like a timeframe of how the damage happened. The adjuster will also determine how much it’ll cost to repair the damage.
In a liability claim, the adjuster may ask you to make a statement on what happened, and they may ask you for contact details for the injured party. The adjuster needs to put together a picture as best as he can of what happened to accurately determine a payout.
4. Pay Your Deductible First
The final part of the insurance claim process before payment is issued typically involves paying your deductible. Your insurance company won’t approve your claim if your damage amount is lower than your deductible.
In the event of an auto accident claim, if your damages are designated a total loss, the cost of your deductible is typically deducted from the amount of money issued as a payout. If your claim is part of a liability case, your policy deductible may not apply to the issue of payment.
For a property damage claim, the deductible may vary based on the type of damage you’ve incurred. Wind-related damages sometimes require filing a different deductible than for other covered damages.
Your standard home deductible is usually a fixed amount, such as $2,500 or $5,000. You could pay this for fire damage or theft, for example. But, 19 states (mostly coastal ones) have homeowners also carry a separate hurricane deductible in case of damages from hurricanes. Your hurricane deductible is usually based on a percentage of your dwelling coverage, typically between 1-10%.
For instance, if you have $300,000 worth of dwelling coverage, and your hurricane deductible is 5% of your dwelling coverage, it would come out to $15,000. So, if you suffered damage from a hurricane, it would need to exceed this amount before you could file a claim.
5. What about the repairs?
For a property damage claim, you’ll receive payment from your insurer once you agree on a settlement amount. If you have a mortgage, the payment will likely be made out to both you and your lender, and the money will be released incrementally during the repairs process so funds are available when needed. You probably won’t just receive a lump sum check.
You can get estimates and choose contractors yourself, even though the insurance company may recommend some. The contractor will bill your insurer for payment.
If you filed a claim for personal property loss, your provider will reimburse you for the actual cash value or replacement cost of the stolen items so you can replace them.
How Do Insurance Companies Pay Out Claims?
Your insurance company will issue reimbursement based on the findings of the adjuster. In property damage or auto claims, this payment will likely go to you. If you have a mortgage or car loan, it may be made out to your lender in case they want to manage or organize the repair process.
In a liability claim, your insurance company will compensate the relevant parties instead of funneling the money through you.
Ultimately, your insurance policy is designed to work for you and protect you from unexpected damages or loss – especially when you need it the most. Your provider will always help you assess the damages in the homeowners insurance claims process and determine the appropriate next steps.
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The editorial content on Clovered’s website is meant to be informational material and should not be considered legal advice.