What Is an Insurance Claim?

You’ve paid your premiums on time (always pay your premiums on time) all these years. So if you sustain a covered loss, whether it’s related to home, flood or auto insurance, your insurance company is the theoretical helping hand reaching out to pull you from the grips of financial despair.

Think about it. If you didn’t have insurance, you’d be stuck paying these exorbitant bills yourself. But with insurance, you’ve basically paid into an emergency fund and may get compensated for your losses.

If your roof gets damaged in a hurricane, your car is smashed by an unobserving driver or a nearby body of water overflows into your home, repairing the damage can be extremely costly. That’s why you have insurance and can file a claim if something does go wrong. But what’s in a claim and what does it consist of? Let’s take an in-depth look.

An insurance claim is a form of written notification from a policyholder to an insurance company that a loss has occurred and compensation for coverage is sought. If the loss is covered by that home, flood or auto insurance company, the company will then validate it and begin the process of review.

However, not all claims are covered by insurance companies. For instance, if negligence is the reason for home damage, your insurance company is not responsible to pay for the repairs. If you only have liability coverage on your auto policy and are at-fault for an accident, your insurance company will not pay for damages to your vehicle.

There are also some scenarios when filing a claim is more hassle than help, and you’d be better off paying for the damages on your own. But let’s take a look at what happens when you file a claim.

If you’ve taken the proper steps to file a home insurance claim, for instance, you’ve submitted all the documentation for the claim and the ball is now in the court of your insurance company. They’ll review the claim to determine if it can be covered, send an adjuster to survey the scene and, if applicable, cut you a check to repair the damages.

1. Your insurance company receives and reviews your claim

Once the claim is submitted, your insurance company will look at all the facts you submitted, which should include things like photos and videos as well as a detailed description of what happened. If they determine the claim may be covered, they’ll move on to step two.

2. An adjuster is sent to the scene

After your insurance company determines that they may be able to cover the filed claim, they’ll send an adjuster to the scene to survey the damages. At this time, you may be able to provide your own written estimates (whether it’s from a local contractor or auto body shop) for what the expected repair costs may be.

3. Your insurance company cuts a check for the repairs

If the adjuster finds the damage should be covered by your insurance company, they’ll provide all their written and physical justification to the company. At that point, if your company covers the claim, you’ll be issued a claim payment. Claim payments aren’t always cut-and-dry, though. You’ll need to know a few more details before the process is over.

A payment of claim is a form of payment, typically a check, from your insurance company that provides reimbursement or upfront money for repairs to a home or vehicle if they sustain damage and that damage is covered by the company.

1. You’ll receive a check from your insurance company

The first step when receiving a payment of claim is being issued a check from your insurance company. This check may be a reimbursement for necessary repairs you’ve already conducted or it may be the full payment of the claim.

There’s a chance that you may get multiple payments from your insurance company. It depends on how severe the claim is and how quickly they can get through the initial stages of the process.

2. Your lender may get control over the payment

If you owe money on your mortgage or car lease, the checks you receive will be made out both to you and your lender. Keep in mind that owing money on a loan means you’re not technically the rightful owner to the property, whether that’s a home or vehicle. Although you may be the one coordinating the repairs, your lender may get control over the disbursement of the payment.

3. You must replace your items to get replacement value for them

If your belongings are damaged and the claim is covered, many home insurance companies will require you to replace your damaged items to get reimbursed for them. That means you can’t just say goodbye to a damaged couch that cost $1,000 and set up shop in your living room with a few outdoor folding chairs and $950 in your pocket.

It likely comes as no surprise that filing insurance claims aren’t great for your future premiums and rates. The more claims you file, the more money you’ll pay for insurance premiums.

If you file too many claims within a short time, your home or auto insurance company may refuse to renew your policy at the term’s end, forcing you to go with another company, which may be tough to find as well.