Insurance 101

What Is An Insurance Claim? How Do They Work?

Today we’ll define what insurance claims are, how they work, and more.

What Is An Insurance Claim? 

An insurance claim is a formal request that a policyholder files to their insurance company after experiencing some sort of loss or incident. 

Filing the insurance claim begins the claims process of the insurance company, during which the company will assess the claim and investigate losses. Ultimately, the insurer will decide whether to pay for the damages and how much the payout should be. 

Types Of Insurance Claims

Insurance claims can vary greatly depending on which insurance type you’re looking at. Here are some common claims that policyholders file for each major type of insurance.

Auto Insurance 

Car insurance claims are often for accidents that happen on the road. 

  • Rear end collisions
  • Water damage
  • Physical injuries 

Homeowners Insurance 

Natural disaster-related claims are very common when it comes to homeowners’ insurance.  Other claims include: 

  • Storm damage
  • Hail damage 
  • Fire & lightning 
  • Theft & break-ins 
  • Structural damage 
  • Broken pipes 
  • Medical expenses (for someone injured on your property)  

Business Insurance

Most businesses will need commercial insurance that fits their needs. 

  • Theft (petty theft, larceny, burglary, etc.) 
  • Property damage 
  • Business liability claim 
  • Product liability claim 
  • Reputational damage 

Health Insurance

Health insurance claims will operate somewhat differently from other kinds of claims. When you visit a healthcare provider like a physician or specialist, they will typically take your insurance information and file a claim on your behalf. Then, the rest of the bill that your insurer did not cover will be sent to you. 

Common health insurance claims include: 

  • Emergency claim 
  • Outpatient claim 
  • Inpatient claim
  • A planned surgery 

Dental Insurance 

Dental insurance is similar to health insurance. A dental insurance policy may cover the following types of claims:

  • Orthodontics 
  • Preventive care
  • Major restorative care
  • Basic care 

Life Insurance 

Life insurance claims and payouts usually take one to two months for the process to be over. It may take longer if there are extenuating circumstances. 

Also Read: Average Life Insurance Cost For Individuals & Families

How Do Insurance Claims Work?

If you want to file an insurance claim with your insurance company, there is usually a procedure that you need to follow and certain requirements you need to meet. 

Regardless of what insurance coverage you are filing a claim for, you will need the following information:

  • Names of involved parties
  • Date of incident 
  • Your insurance policy number 
  • A formal report – an incident, medical, or accident report 

It will also help to have photographic evidence of what transpired, such as property damage. 

Some insurance policies might have a time limit on how long you are allowed to file a claim after the incident. It’s a good idea to check on this time limit so you are aware. 

Can a third party file an insurance claim for someone else?

Usually, only the person or people listed on the policy itself can claim insurance payments. However, for certain insurance types, such as death benefits, someone else could file claims on behalf of the insured. 

What makes an insurance claim rejected? 

Insurance fraud costs about $40 billion every single year. Insurance companies are naturally wary of giving insurance payouts to illegitimate or exaggerated claims. 

If the claim you’ve filed lacks adequate supporting documentation, the insurer might reject your claim. That’s why it’s so important to get as much information about your incident and claim as possible before filing it. 

In some cases, a claim might get rejected unintentionally because of billing or coding errors, especially when it comes to medical insurance claims. You may want to double check with your insurer and provider if this occurs. 

How Do I Initiate An Insurance Claim?

You can initiate an insurance claim via the method your insurance company has listed for your policy. In most cases, you need to have your name be listed on the policy before you can file a claim, but exceptions exist. 

Typically, you can initiate your claim either online or by contacting an insurance agent by phone. You may also be able to file via a mobile application, fax, or email, or by visiting the insurer’s office.  

When filing an insurance claim, it is important to have the proper information and documentation with you. 

To maximize the chances of your claim being accepted, you should have the date of the incident, any photos of the damages or losses, your policy number, names of involved parties, as well as a formal report of the incident. 

The more evidence you can gather, the more likely your claim will be accepted. 

Once you have initiated the claim, the process officially begins. Your claim will be reviewed. An insurance claims adjuster will be assigned to you. They will assess whether your claim is legitimate, how much your insurance payout amount should be, and more. 

How Is An Insurance Claim Paid?

Your insurance company has to approve your claim after it has been filed. If it is indeed approved, the company will also decide the insurance payout you will be awarded. 

Payment is usually paid to you in the form of a check. If you need, it can also be deposited into a bank account or directly sent to the service provider that sent the bill(s). 

The process for claims typically takes around a month after your initial filing of the claim. However, this process length can vary greatly. 

It may even take a few months after you have filed the claim before you receive your insurance payout after it has been approved.  

If your insurance policy has a deductible, you need to pay out of pocket that amount first before coverage can apply. 

Sometimes, the payout may not be what you expected. That is why it is important to buy an insurance product from a reputable and reliable insurance company.  

Do Insurance Claims Affect Your Credit Score?

There is no direct impact on your credit score if you file an insurance claim. 

Indirectly, insurance could negatively affect your credit score. If you are not financially unable to pay your insurance premiums or meet your deductible for the coverage you need, you might start incurring debt or have trouble meeting payments.

If you miss payments and don’t pay your bills back within a grace period, this could have a bad impact on your credit score. Remember to check your credit score if you’re worried about how healthy it is. 

Inversely, credit score can affect your insurance. If you have a very low credit rating, your insurance premium might go up. 

If you’re having trouble managing your insurance premium or getting coverage for your claim, it might be worth it to switch policies or adjust your deductible. 

How Can Making An Insurance Claim Affect Your Policies And Premiums?

Making an insurance claim can end up increasing your insurance premium, but only in some circumstances. Generally, if you are found to be liable or at fault for what happened, then your insurance rate might be reassessed by your insurance company. For example, when it comes to auto insurance, if you are found at fault for a collision, this might negatively affect your premium by raising it to become more expensive. 

Property and casualty insurance policies will take note of how many claims you file and how frequently you do. This will commonly have an impact on your insurance premium. 

If you aren’t found at fault for the damage to a home (e.g. hail damaged your house), your property insurance company may decide not to increase your premium. 

Insurance companies might raise premium prices if they assess your circumstances following a claim and find that your risk levels have substantially increased. 

When necessary, premiums are usually raised by a certain percentage amount, determined by the insurer. 

If you file an excessive amount of claims, an insurance company may actually deny you coverage. 

Insurance claim FAQs

1. How long is the insurance claim process?

You can generally expect the claims process to take 30 days following your initial claim. 

If there are extenuating circumstances, the claims process can easily take longer than 30 days. 

2. Is filing a claim mandatory?

If you don’t file an insurance claim, you will have to pay out of pocket and will not be receiving any insurance coverage for the incident. 

It is not mandatory to file a claim, but your insurance company might void your policy if they find out that you didn’t report an accident depending on the type of policy you have. This voiding of a policy commonly occurs in auto insurance. 

3. What happens if you don’t file a claim on time? 

If you don’t file a claim in a timely manner after the incident, your insurer might not cover the expenses. 

Failing to file a claim may also have repercussions on your future coverage, depending on what policy you have in place.  

4. What does an insurance adjuster do?

A claims adjuster will look over the information you have provided and potentially visit the site of the damages, such as to inspect property damage in the case of homeowners’ insurance. 

The adjuster will work to determine exactly how much payout you will receive if the claim is accepted. Usually, the adjuster represents the insurance company. 

5. Does filing a claim raise my insurance premium?

If you’re filing a claim with a property-casualty insurer, which may provide coverage for vehicle or property damage, you might see an increase in your insurance premium depending on the type of damage incurred and what caused the damages.

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