Personal Finance

How to File an Insurance Claim Without Making a Big Mistake

The U.S. insurance industry earns approximately $30 billion in profits every year, according to data from the U.S. government. The way the business works is pretty simple. People pay premiums each month, and insurance companies pay out on claims—though they don't pay every claim.

In too many cases, insurance customers get in their own way and botch an insurance claim. For starters, they don't necessarily understand insurance policy contracts, despite the fact that half of all U.S. states have "plain English" insurance contract legislation in place.

Just the Facts Ma'Am

Another, more disconcerting reason for insurance policy claims to be rejected is that consumers say the wrong things and literally talk themselves out of insurance claim approvals.

"There are conversations to avoid with insurance claims," says Walt Capell, president of Workers Compensation, in Columbia, Mo. "People filing an insurance claim should be specific about the facts of the claim. It's equally important, to be honest. Adjusters are trained to be suspicious and catch lies."

To keep your insurance claim on the right track, avoid mistakes like the ones listed below to keep your claim on a "green-light" track."

1. Don't Speculate

It's always helpful to remember that insurance companies have a vested interest in eliminating risk for themselves, notes Kevin Patrick, founder of Kevin Patrick Law, LLC, in Atlanta, Ga. "That's why it's important not to speculate," Patrick says. "For example, on a casualty claim, an insurance company representative may ask you if you're alright, but that can be a dangerous question."

People naturally want to say they are fine, but symptoms oftentimes manifest themselves a few days later, so answering "yes" will set you up for failure, Patrick notes. "Insurance companies may even offer an early (and lower settlement) claiming it's in a person's best interest to accept it. It's not - it's a way for them to extinguish risk right away."

2. Don't Be Sherlock Holmes

If you're submitting a claim on your own behalf, provide the company with basic information about the claim but don't try and diagnose the cause or the extent. "The insurer may ultimately send someone to review the damage, but trying to act like your own detective when reporting the damage may start the claim off in a direction that is more likely to result in a claim denial or dramatic reduction in coverage," says Matthew Struck, co-founder of Treadstone Risk Management, LLC, in Morristown, N.J.

Struck advises working with a professional insurance broker, instead. "If you have a broker, provide them with as much detail as possible about the claim," he advises. "A good broker will submit the claim with as favorable of a description as possible to help remove bias on the part of the claims adjuster."

3. Don't Assume Anything With an Insurance Claim

There can be an underlying or concurrent event that can be difficult to identify. "These events could drastically impact whether insurance coverage is afforded or not," says Brian Evans, a public adjuster at Eastern Public Adjusters in New York City. "Let the insurance carrier determine the cause and origin of the loss. You'll have opportunities to address any problems if they arise."

Less Is More with Insurance Claims

The takeaway on getting an insurance claim approved? Less is more.

"Just answer the questions that you are asked as accurately and concisely as possible," says Evans. "The insurance contract is a legal contract and the application of coverage can be complex. A simple misunderstanding or misstatement can result in nightmares for you."

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Editorial Disclaimer: Opinions expressed here are author's alone, not those of any bank, credit card issuer, or other company, and have not been reviewed, approved or otherwise endorsed by any of these entities. All information, including rates and fees, are accurate as of the date of publication.
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