Insurance Claims 101
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UPDATED: Mar 13, 2020
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Insurance exists for reasons beyond being a pain in our rears (and wallets) and making insurance companies rich.
Ultimately, insurance is designed to protect us from devastating financial losses we may suffer as a consequence of owning property (especially if we borrow money to buy it) and/or operating a vehicle.
Millions of people pitch in their insurance premium dollars in exchange for a promise from the insurer to take money out of that pool to pay for covered “insurance claims” we file.
What Is an Insurance Claim?
Hopefully you never have to find out. But the fact is, many of us will have to file an insurance claim at one time or another…so we should at least know what it is.
An insurance claim is a request made to an insurance company to be financially indemnified for a loss. An insurance policy is a contract based on the promise that if you pay your premium, the insurer will indemnify you for specific financial losses you may suffer during the agreed upon policy period.
Say what? In plain English, a claim is your formal request to get the money back for a loss you suffered. Could be damage to your car…could be a payout for a life insurance policy of a deceased individual.
Insurance industry language can be a bear, so let’s look at a few examples of a claim you may file.
Auto Insurance Claims:
You can file a claim to have damage to your car repaired if you purchased physical damage coverage as part of your personal auto insurance policy.
Perhaps you backed into a cement pole at a gas station and dented your bumper. You would call the insurer and file a claim (request payment) for money to fix your vehicle. Of course, the dollar amount of the damages must exceed your auto insurance deductible in order to collect for physical damage losses to your car.
Life Insurance Claims:
This one may be easier to understand. You would file a claim for benefits on a life insurance policy if the person who passed named you as the beneficiary.
An example would be a family member who purchased a life insurance policy in their name, listing you as the beneficiary in the event of their death. In the unfortunate event the insured (family member) passed while the policy was active, you would file a claim to receive the death benefit.
Keep in mind life insurance companies don’t necessarily contact you in the event of a loved one’s passing, so be sure to review all the deceased’s insurance paperwork to determine if you are a beneficiary on a life insurance policy.
How Insurance Claims Work
In the event you suffer from an illness or bodily injury (or even death), or are exposed to property damage or are liable for causing any of those types of losses to someone else, you will need to file an insurance claim with your insurer to have them cover the expense.
The exact steps you need to take when it comes to making an insurance claim are outlined in your insurance policy…odds are you haven’t read that document word for word.
But the good news is that it’s there when you need it, and common sense usually prevails.
Additionally, you are always free to call your insurer or insurance agent in the event you feel you may need to file a claim.
Without going into painstaking detail, there are few things you should keep in mind when filing an insurance claim.
1. Contact your insurer or agent “as soon as is reasonably possible” to give them the facts about the accident, damage, etc. You are not expected to make the call on your way to the hospital in the back of an ambulance, but you shouldn’t wait too long either.
2. Take pictures and provide as much detail as possible and secure witnesses if there are any available. Taking pictures of an auto accident scene may help your side of the story and serves to capture details that may not be present a day later…when the “other guy’s” story changes.
The average Joe won’t likely have to provide receipts and pictures as evidence of owned property, but your gold toilet seat or Picasso will require some justification come claim time.
Tip: Nowadays, most of us have digital video cameras on our phones. Take 10 minutes to walk around your home with the video running and cover your personal belongings (go slow over jewelry and other high-dollar items.
Take the file of the video you shoot and upload it to your email account, where it can be stored indefinitely on someone else’s server.
Remember, the video will do you no good if the camera is lost or destroyed too.
3. Keep an active journal of your correspondence with your insurance company and cooperate with them throughout the insurance claims process…and always tell the truth!
How Long Does It Take to Settle an Insurance Claim?
Once the initial insurance claim is filed with the insurer, a claims adjuster will be assigned to your particular claim. If we’re simply talking about a cracked windshield, you can expect the whole thing to be resolved over the phone.
When it comes to bodily injury and more severe property damage claims, you can expect to meet your claims adjuster in person.
Typically, the higher the dollar amount and the more property, vehicles, and/or individuals involved, the longer an insurance claim will take to be settled. So be patient.
Furthermore, if bodily injury is involved, your insurance claim may take years to settle, as the injured party waits to determine the extent of their injuries.
However, most insurance claims are settled out of court, as that is the quickest (and often cheapest) way for the insurer to settle.
But never take the first offer you receive in a serious injury or property damage insurance claim. You need to realize the full extent of your loss before accepting a settlement.
Keep in mind that most insurance claims have a time limit, meaning if you don’t file a lawsuit within that specified time period, you’ll be stuck with whatever the insurance company agreed to pay you.
Who Can File an Insurance Claim?
Many insurance policies offer coverage for your property and coverage for property damage and bodily injury you cause to another person.
As a result, it’s possible to file an insurance claim against your own insurance company under the physical damage portion of your auto insurance policy or a property damage claim for your homeowner’s insurance policy.
Filing an insurance claim for property damage will entail a deductible, which is designed to keep us from filing insurance claims for minor property damage expenses.
Conversely, if you injure a third party or damage their property, the third party can file an insurance claim against your insurance company to recover the damages they suffered as a result of your negligence.
Even more interesting, you can file an insurance claim against your own insurance company for bodily injury or property damage you suffer as a result of someone else’s negligence. How? Underinsured and uninsured motorist coverage is designed for just that.
If another driver with no insurance (or not enough insurance) causes you bodily injury or property damage, and you were wise enough to purchase uninsured and/or underinsured motorist insurance, you would be covered by your own auto insurance policy.
After you file the claim, your insurer will sue that driver to recover the money they paid out to you. This is known as subrogation.
Fact: UM and UIM coverage will also cover you against a “hit-and-run” accident in which the negligent party is not discovered. There is usually a separate deductible, $250, for this type of claim.
The deductible is designed to keep us on the up-and-up when filing fraudulent property damage claims against our own insurer.
You could even file an insurance claim against your own company if the driver who hit you has insurance from the same company (e.g. two drivers insured by Allstate colliding with one another).
What If My Claim Is Denied?
It doesn’t matter if you are talking property, casualty, life or health insurance. If you purchase an insurance policy, you can file a claim for financial reimbursement.
Of course, this doesn’t mean your claim will be paid or that you’ll get the exact amount of money you think you deserve.
Claims are denied all of the time by insurance companies.
You must read your policy and/or call your insurance agent to determine if your “loss” is a covered event on your policy.
Every insurance policy has well detailed rules (that you agreed to as part of the policy/contract) for how to go about processing a dispute with your claim.
Final Word on Insurance Claims
The more insurance claims you file (why did my car insurance rate go up) the higher you can expect to pay for insurance coverage.
When it comes to damage to your own property, assuming it’s minor, you might consider paying for it yourself.
On the other hand, when dealing with a bodily injury claim, or damage to someone else’s property, you need to notify your insurer “as soon as is reasonably possible.”
The guy you hit in the Wal-Mart parking lot may be satisfied immediately with $100 in cash to fix his bumper…and subsequently speak with a doctor and attorney who might just want to see about filing a lawsuit for his newly discovered “stiff neck.”
If you paid the $100 to avoid the hassle of filing an insurance claim, or to save money on your car insurance by not alerting the insurer, you’d be out of luck when sued by this unscrupulous accident “victim.”
Your insurer has every right to deny your insurance claim as a result of you not notifying them when the accident originally occurred. Good luck in court!