Insurance is a crucial safety net that enables you to avoid potentially devastating losses from unexpected property damage or the death of a loved one.
Auto, homeowners, renters, and life insurance policies provide not only financial protection, but also peace of mind knowing that your expenses will be covered if the worst happens. Understanding how to file a claim and what to expect during the payout process can ease the stress you may be under at such times. It will also help you avoid delays and denials.
What is an insurance claim?
According to the International Risk Management Institute, “a claim may be a demand by an individual or corporation to recover, under a policy of insurance, for loss that may come within that policy.”
You will usually file a claim with your
company after an accident, and your homeowners or
provider when your apartment or house is damaged. In the case of life insurance, you will file a claim if the policyholder (or someone named in the policy) dies.
Filing an auto insurance claim
You can file three main types of auto insurance claims: comprehensive, collision, and liability.
Comprehensive coverage replaces or repairs your vehicle if it’s stolen or damaged. Collision insurance covers your vehicle if you’re in an accident or collision.
If another party is at-fault for damage to your car, you will typically file a claim with your insurance company, which will work with the other party’s insurance provider to get you paid.
How insurance companies pay out auto insurance claims
After contacting your insurance provider, it may send an adjuster to inspect the damage. According to Allstate, some companies may ask you to obtain an estimate from a mechanic and send a report back to the insurance company.
Auto insurance companies may reimburse you by check or pay the repair shop directly. Also, be aware that your deductible will be reflected in your final settlement amount. So, if your deductible is $500 and your claim amount is $2,000, you’ll only receive $1,500.
Filing homeowners and renters insurance claims
protects your dwelling and belongings. It also offers liability coverage if someone is injured on your property. Renters insurance provides coverage for your belongings as well liability. Your landlord is usually responsible for providing insurance for the building’s exterior.
How insurers pay homeowners and renters insurance claims
Replacement cost coverage covers the amount to rebuild or replace your dwelling or personal property based on current cost standards, says Rivera. Unlike actual cost coverage, it doesn’t consider depreciating factors like your home’s age. For instance, if your kitchen is ruined by a fire, with replacement cost coverage your insurer would pay to replace the belongings in it and rebuild the destroyed portion of your home with materials of similar value.
Guaranteed replacement cost coverage covers your entire cost of repairs. This coverage can be most beneficial in times of rising inflation.
If you have a mortgage on your home, your lender will typically list themselves as an additional policyholder. Your insurance provider will then issue a check to you and your lender, according to the Insurance Information Institute (III). Your lender will stow your insurance money away in escrow and reimburse you as you make the repairs to your home.
5 steps to file a homeowners, renters, and auto insurance claim
The processes for filing homeowners, renters, and auto insurance claims are relatively similar. The sooner you file, the easier it is to defend your claim.
Step 1: Obtain as much information as possible
If you are in a car accident, exchange your drivers license and insurance information with the others involved. Take photos of any damage or injuries.
According to Allstate, here is some information you should gather at the scene.
- Location, date, and time of the accident
- Name, address, phone number, and insurance policy number for all involved in the accident
- Weather conditions
- Photos of damage
- Copies of police and accident reports, if applicable
If you experience a home-related loss, document the damage with photographs and videos. Note the date, time, and other details related to the incident .
If theft or loss occurs, you should file a police report. Some carriers will require this. Contact the police and provide details of the event as best as possible.
Step 2: Review your coverage and deductibles
Homeowners insurance is not legally mandated, but most
That said, your auto and home insurance may not cover certain damage. Review your policy to understand what is covered and what you may be paying out of pocket. As for deductibles, you may have to pay out of pocket if a high deductible eats into your insurance claim amount.
Step 3: Contact your insurance carrier as soon as possible
If you need to file a claim, it’s essential to report the incident and file promptly.
According to Jerry, a car-insurance comparison platform, while the statute of limitations to file an auto insurance claim is generally two to three years, most insurers require you to report an accident within 30 days.
As for homeowners insurance, the III says most policies require claims to be filed within a year of the date of a home-related disaster. Failure to notify your provider promptly could result in a denial. Also, don’t assume that your insurance company will compensate you for additional living expenses until you speak with your agent.
Call the number listed on your policy or file a claim online. Many carriers have smartphone apps to file claims and upload pictures for faster processing. If your provider requires you to fill out any forms, be sure to do so as soon as possible and send them back within the deadline to avoid delays.
Step 4: Meet with an adjuster
Your insurance company will assign an adjuster to inspect the damage to your home, unit, or car. Prepare for the visit by creating a list of the damaged or stolen items. Also, be sure to have any pertinent information on hand, such as details of the accident, the contact information of anyone involved, and any photos or videos related to the incident.
Step 5: Avoid further damage to your property
Don’t do something you’re uncomfortable with or that doesn’t look safe. If your home or car is damaged, your carrier may offer do-it-yourself tips if anything needs quick and temporary repairs. Above all, if your property is damaged, you want to prevent further loss. Leave it to your insurance company to send a professional for significant repairs.
Filing a life insurance claim
Life insurance is a contract between the policyholder and the life insurance company. The policyholder pays monthly or annual premiums for a payout that the policyholder’s beneficiaries will receive, also known as the death benefit.
After the policyholder dies, you usually file a claim to receive their death benefit if you are the beneficiary.
How life insurance companies pay out claims
According to the III, there are four ways you can choose to receive life insurance benefits:
- Lump-sum: The insurance company will pay the entire death benefit upfront.
- Specific income provision: You will receive the principal and interest of the death benefits in increments on a predetermined schedule.
- Life income option: This payment plan will ensure you will receive death benefits for life. The amount you receive incrementally will depend on your gender and age.
- Interest income option: You can choose to have the insurance company pay you the interest on the death benefit and hold the principal amount. Upon your death, the death benefit goes to a secondary beneficiary.
4 steps to file a life insurance claim
Upon the policyholder’s death, you must take these four steps to claim their life insurance benefit.
Step 1: Obtain copies of the death certificate
Submit a copy of the policyholder’s death certificate to confirm the time and place where they died.
You can obtain a copy from the place of the policyholder’s death (usually a funeral home or a hospital). You can also request a copy from your local vital records office.
Step 2: Obtain the policy document
You must also provide the life insurance provider with the policyholder’s life insurance documents. The life insurance policy documents list the policy number and beneficiary names, which are necessary to ensure you’re filing a claim on the correct policy.
Many policyholders will neglect to let their beneficiaries know that they are on the policy. If you don’t know where the policyholder’s policy documents are, the III recommends taking these steps:
- Search through the deceased’s documents and correspondence.
- Submit a request to the National Association Of Insurance Commissioners (NAIC) life insurance policy locator service.
- Contact the state’s unclaimed property office.
Step 3: Complete the life insurance claims form
Insurance companies will usually make their claims forms available online. Call the policyholder’s insurance provider if you need assistance or cannot locate them.
You will need to include the policy number and cause of death on the forms. Once you’ve done that, submit a copy of the policyholder’s death certificate, policy document, and the claim forms to the insurance company by mail.
Step 4: Choose your payment type
After the insurance company approves your claim, choose which one of the four ways you’d like to receive the death benefits. There is no time limit on when you can claim your benefits for life insurance.
How long does it take for your insurance company to pay out your claim?
The amount of time it takes to process a claim will vary by the insurance type as well as the complexity and total amount.
“Complex claims often require investigations, opinions of third-party professionals, and a lot of documentation, which can significantly slow the claims process,” says Rivera.
Here is how long it will normally take to receive a claim:
Source: insurance.com *
Source: Policygenius **
“Report your claims in a timely manner as most policies have a ‘duty to report’ clause and your claim can be denied if you don’t report in a timely manner. Also, provide as much information as possible and supporting documentation to help speed up the claims process,” says Rivera.