Insurance 101: Understanding the Insurance Claims Process

When you buy insurance, you’re paying for something you hope you won’t need to use. But if you have a loss—your car is damaged in an accident, or a fire destroys your kitchen, for example—you’ll be thrilled that you have insurance in place! The right insurance policy can help you come out of a disastrous situation in good shape financially.

You might be concerned, however, about the unknowns surrounding the insurance claims process. How does it work? While each insurance company has its own procedures, and all claims are unique, here is a rundown of the basics.

(For the purposes of this article, we will be concentrating on property damage claims for home and auto insurance.)

What you need to file a claim

When you have a covered loss—a loss that your insurance company specifies that they will reimburse you for as found in your policy documents—filing an initial claim is fairly simple. Some companies let you file claims online, or have a dedicated claims number you can call. Before you make the claim, you’ll need certain information on hand. (If you don’t immediately have all the information at your fingertips, you may be able to provide it later.)

For auto insurance, you’ll need your policy number, the names of those involved in the accident, the other driver’s insurance information, details of the accident, and a copy of the police report if you have one.

For a homeowners claim, you’ll need your policy number, and eventually documents like receipts or a home inventory that provides a record of the value of the property you need to replace. It’s helpful to take photos or video of the damage if possible.

Once you’ve filed your claim, your insurance company will begin an investigation, usually sending an adjustor to review the damage. Once the adjustor files his or her report, the insurance company will evaluate your claim and accept or deny it. If your company denies your claim, you often have the ability to appeal that decision.

Before your claim is paid, you will have to pay your deductible, the amount of money you’re responsible for paying before your insurance takes over. A homeowners insurance deductible may be a specific dollar amount, or it may be a percentage of the insured value of your home.  Auto insurance deductibles are set dollar amounts, such as a $500 deductible for comprehensive and collision coverages. Sometimes you will pay the deductible to the person repairing your car or home, or your insurance company may simply subtract your deductible from your claim check.

How and when will you receive your claim payout?

How your insurance company will pay your claim also differs, depending on your policy, and the size and type of the claim.

For car insurance, if you lease your vehicle or have a car loan, your claims check may be made out to both you and your lender, since your lender has a financial interest in your vehicle. You’ll need to work with them to manage the funds so you can have your car repaired. In some cases, your insurance company may pay the repair shop directly. If your vehicle is totaled, the claim payout will go towards paying off your loan. Any funds remaining will come to you.

Home insurance claims can be more drawn out because they’re more complex. Homeowners insurance policies cover your home’s structure, your personal belongings, and in some cases your personal living expenses if you have to move out of your home while it’s being repaired. You may receive one or more payments for each part of the claim.

When receiving payment for structural damage, your checks may also be made out to you and your mortgage lender, who typically releases funds to allow you to get work started on your damaged home. They’ll release more funds as needed, with the final amount released once the repairs are completed and the home passes inspection, if necessary. 

Payment for your personal belongings or additional living expenses should come to you directly. If you have replacement cost coverage for your belongings, you will need to actually replace the items and submit receipts to your insurance company to receive full replacement cost reimbursement.

Will a claim affect your insurance rates?

Whether or not an insurance claim affects your rates depends on several factors. For car insurance these include whether you were at fault, whether the claim is above a certain dollar amount, your personal claims history, and your overall driving record.

Multiple homeowners insurance claims can also drive up the cost of insuring your home. If your claim is small, only a few hundred dollars more than your deductible, it may not be worth filing. Some home and car insurance companies offer discounts if you go a certain number of years without filing a claim, so you’ll lose that discount if you file a claim. Filing multiple small claims can often backfire in the form of higher insurance premiums, or insurance companies refusing to cover you.

That said, if you have a significant covered loss to your home or vehicle, don’t hesitate to make a claim on your insurance. That’s what it’s there for.

Personalized attention at Lakewood Financial Services

Choosing the right insurance coverage can be confusing. Lakewood Financial Services is here to help. If you’re in the market for a home or auto insurance quote, please call a Lakewood Financial Services agent today at 941-747-4600 (click here to get a quote online). Our agency works with many standard and non-standard insurance companies, and we’ll be happy to shop around for a policy that fits your personal situation.