How Insurance Claims Work
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Jimmy Cooper, Marketing Coordinator
The majority of us will have to at least file one insurance claim at some point during our lives. Many probably already have experience filing claims but might not understand the exact process. So what is an insurance claim exactly? An insurance claim is when you, as a policyholder, notify your insurance provider for compensation for a loss or policy event that you have coverage for. Typically only the person listed on the policy can file a claim; however, in some instances, a third party can file a claim on behalf of the insured individual. For example, if you are involved in a vehicle accident, someone else caused, you can file a third-party claim with the at-fault party’s insurance.
What do Insurance Claims Cover?
Depending on your purchased policies, insurance claims can cover repairs, replacement, or financial losses. Insurance policies cover home and auto repairs, medical exams, workers’ compensation, and funeral expenses.
Health insurance claims are among the most common type of claims. Inpatient hospital stays or surgical procedures can be costly, forcing many into debt due to an illness or injury. Health insurance plans have a copayment, a static amount for sharing the cost of coverage between the customer and the selected plan. Because health insurance claims are so common, there is little to no responsibility to file a claim, as most hospitals or care facilities will file an electronic claim on your behalf.
Auto or home claims which fall under property and casualty claims, are also prevalent claims to be filed. The policyholder must file a claim, and then a claims adjuster from the insurance company will inspect and assess the damage to your property, whether that is a vehicle or a home. The claims adjuster will determine the best course of action to repair your property and offer you a sum of money the insurance company is willing to cover based on market values. This first check is usually an advance and not the final payment. In some cases, you may be offered an on-the-spot settlement. Even if you accept the check and you discover additional damage later, you can reopen the claim and file for the additional damages. As mentioned above, there are rare cases where a third party can file a claim with the at-fault party’s insurance. However, the majority of claims filed must come from the policyholder.
Life insurance claims are a little different as they require documentation to be filed. Documents required are a claim submission form, and a death certificate. It is not uncommon for the insurer to ask for a more in-depth examination to verify that the cause of death doesn’t fall under an exclusion in the contract, for example, death from committing a criminal act, suicide, or the death happens during the exclusion period during the first few years of the policy’s inception. Check out our blog Deep Dive into Life Insurance, to read more about life insurance policies.
Receiving your settlement
It is possible to receive one or multiple checks for your settlement. According to the Insurance Information Institute, when damage occurs to your home and personal belongings, you usually get two checks from your insurer. An additional stipulation to consider is that your mortgage lender may control your payment. For home claims, if you have a mortgage on your house the check can be made to you and your mortgage lender. This can also be the case if you live in a townhouse or condominium because the management company may require the dwelling financial entity to be named co-insured. This way, the party with a financial interest in your property can oversee and make sure the necessary repairs are made. The insurance company may also cut a check directly with the party making the repairs. For auto policies, the check could go directly to the body shop of the insurer’s choosing. Always communicate with your insurance company and ensure they agree with the settlement conditions. If you are not completely happy with the insurance company’s choice to make the repairs, you might be able to negotiate and recommend a contractor or body shop. To get full reimbursement for damages, your insurer may ask you to purchase replacements and give them copies of receipts for proof of purchase. The insurer will pay the difference between the value initially received and the total cost of the replacement. The timeframe can vary from one insurance company to another, and it is best to consult with your agent to know how long you have to purchase replacements. In the event of a total loss, insurers will usually pay the policy limits (according to state laws), meaning you can receive reimbursement for what you were insured for at the time of the loss.
Generally, filing claims is straightforward and doesn’t take much effort. However, a good rule is that filing claims can raise your rate with your provider. So it is a good idea to research to find out if the claim is forgiven and if you have a previously filed claim that counts against you. Rates can rise following a claim because the insurer will see you as more of a risk than previously. Sometimes with proof that you were not at fault for the claim, the price hike can be reversed, so always talk to your agent. Filing too many claims in a short period can cause your insurer to choose not to renew your policy even if the claims were not your fault. Our blog, Why Insurance Premiums Increase, for more information on insurance price increases.
In conclusion, a brief understanding of the claims process before you file can be a tremendous advantage. The best rule to follow is to stay in contact with your agent and not be afraid to ask questions, especially when you sign up for a policy. At Price & Ramey, our professional and knowledgeable staff is here to answer your questions about submitting your claim or if you have questions about signing a new policy. Whether you need a health, auto, home, life, or business policy, Price & Ramey is happy to help. Call us at 877-563-4386 or click here for a quick quote today. Many unique needs. One Price & Ramey.