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Insurance is an odd purchase—it's something you buy and hope you'll never have to use. But chances are at some point, you'll need to file an insurance claim. An insurance claim is a request for your insurance company to pay for something your insurance covers, such as a car accident, a house fire or a visit to the emergency room.
How Do Insurance Claims Work?
To receive payment from your insurance company for a covered event, you'll have to file a claim. This generally involves completing a form documenting the covered event and requesting payment, and then submitting the form to the insurance company. The insurance company will either approve and pay the claim or deny the claim.
If your claim is approved, you may have to pay a deductible, which is the amount you're responsible for paying before insurance kicks in. Auto, homeowners and some health insurance policies have a deductible, and how they work can differ depending on the type of insurance. If you file an auto insurance claim for $3,000 worth of damages and your deductible is $500, the insurance will pay out $2,500 ($3,000 minus the deductible).
The deductible for a homeowners policy may be a dollar amount (as with auto insurance) or a percentage of the insured value of your home. If your home is insured for $300,000 and you have a 1% deductible, your deductible would be $3,000. Homeowners coverage for natural disasters such as earthquakes, floods and hurricanes may have deductibles up to 20%.
In some cases, you have to pay the deductible to whoever is repairing your car or home. In others, your insurance company simply subtracts your deductible from the amount they pay out for your claim.
Some health insurance plans also have deductibles. If your plan has a deductible, you'll have to pay all costs for covered health care or medications until you hit the annual deductible amount, at which point insurance starts to pay out. However, many policies cover certain services, such as preventive or prenatal care, before you meet your deductible—although you may still have a copay for those services.
For example, if you have a $6,500 annual deductible, you'd have to pay for the first $6,500 worth of health care and medications each year. But if your plan covers preventive care before your deductible is met, you can go for an annual physical and pay only your copay, rather than the full cost of the visit.
Types of Insurance Claims
There are several types of situations in which you'd make an insurance claim, depending on your specific policy and what it covers.
- Auto insurance: You'll typically file an auto insurance claim if you're involved in a car accident with another driver, your car is stolen, your car is damaged by a collision or natural disaster, or if you injure another person or damage their property with your car.
- Homeowners insurance: You might make a homeowners insurance claim if your home is damaged by a fire, windstorm, lightning or hail; if your home is burglarized or vandalized; or if someone is injured on your property (such as a guest who slips and falls in your kitchen). Homeowners insurance typically doesn't cover floods, earthquakes, landslides, sinkholes or sewer backups, but you can get separate coverage to protect against these risks.
- Health insurance: You'll make a health insurance claim (or your provider will, on your behalf) whenever you receive health care or fill a prescription that is covered by your insurance policy.
- Life insurance: When a person who has life insurance dies, the beneficiary of the policy files a claim with the insurance company to receive the proceeds of the policy.
How to File an Insurance Claim
The process for filing an insurance claim varies depending on the type of claim. Here's how to file the most common types of insurance claims.
- Contact the police. No matter how minor the accident, if another party is involved you should always call the police so they can file a report. A police report is often required in order to file a claim. It can also help determine who was at fault and provide valuable evidence if the other party decides to sue you.
- Gather information and evidence. Get names, contact information, insurance information and ID numbers for other parties involved in the accident, as well as names and contact information for any witnesses. Take photos and videos of the scene and any damage to vehicles or property.
- Contact your insurance company. If you've been in an auto accident, call from the scene if you can; if not, contact your insurance company as soon as possible afterwards. Your insurance representative will let you know the next steps, timelines, information and documentation needed to process your claim, including any deadlines.
- Contact the police, if needed. If there was a crime, such as burglary or vandalism, call the police so they can come out and take a report.
- Contact your insurance company immediately. Your provider can help you decide if it's worth filing a claim; depending on your deductible and the extent of the damage, it may make more financial sense to pay for the loss yourself. If you do want to file a claim, the representative will provide claim forms and explain what to do next.
- Take photos and videos of the damage. A claims adjuster from the insurance company may need to survey the damage in person; if possible, avoid discarding damaged items until then.
- Gather documentation. Look for receipts, pictures or videos, home inventories and anything else that provides a record of the value of covered property, such as furniture or clothing, that you'll need to replace. You'll have to provide the insurance company with a full list of these items in order to be reimbursed.
- Make needed repairs yourself. You can make any repairs that are necessary to prevent further damage (like fixing a hole in the roof). Just be sure to take photos first and keep receipts for the cost of repairs, including labor, supplies and equipment.
- Get estimates. You can start getting estimates from local contractors right away; this can help the insurance company in determining the cost of repairs.
Depending on your insurance policy, you may not have to file a health insurance claim. Often, the medical provider or pharmacy will get your health insurance information and submit the claim themselves. The insurance company will process the claim and pay out directly to the health care provider. (You'll be responsible for any insurance copays at the time you receive health care or fill your prescription.)
Some health insurance policies require submitting your own medical claims. In this case, you'll generally pay for medical care or prescriptions upfront. You then fill out and submit a claim form to the insurance company and may have to provide receipts or documents substantiating the treatment you received. You can get claim forms from your health insurance provider's website or (if your health insurance is employer-sponsored) from your HR department.
Before getting medical care, be sure you understand what your health insurance covers, who is responsible for submitting claims, and what documentation is needed to do so. This can help prevent unexpected bills and ensure you get reimbursed in a timely fashion.
Often, the hardest part of filing a life insurance claim is finding the insurance policy, especially since many people have more than one. You may be able to find a policy by searching through the deceased's paperwork; checking their safety deposit box; or contacting their attorney, financial planner or employer. Statements or bills from life insurance companies that arrive in the deceased person's mail are another clue.
When you find the policy information, contact the insurance company that issued it. They'll provide the claim forms and can guide you through the process of filing a claim. You'll need to submit a certified copy of the person's death certificate with the claim.
How Will My Insurance Claim Be Paid?
Once you've paid or met any applicable deductible, how will your insurance claim be paid? That depends on a variety of factors, including the type of claim, your policy, your insurance company, state laws and whether you have a mortgage or auto loan. In general, however, here's what you can expect.
If your car needs repairs, your insurer may send a check directly to you, directly to the repair shop or make it out to both you and the repair shop. If a financed vehicle is totaled, the insurance payout will first be used to pay off the loan; with any remaining amount going to you.
Initially, you'll get a payment for the cash value (that is, the current value) of your personal property. If your policy covers the cost of replacing old items with new items (actual replacement value), you'll generally have to buy the replacement items, turn in receipts to the insurance company, and get reimbursed for the difference between the old item's cash value and the replacement item's cost.
You may get separate payments for repairing the home, replacing personal property, and additional living expenses (ALE) if you have to live elsewhere while the home is repaired. If you have a mortgage, the lender is generally listed on your homeowners insurance. Payment for repairs may be made in both your name and the lender's name or may go directly to the lender, who will hold it in an escrow account and release money for repairs as needed.
Some policies pay claims directly to your health care provider or pharmacy. Others require you to pay medical and prescription costs yourself upfront, then submit a claim and get reimbursed.
The policy beneficiary will receive a payout, called the death benefit or settlement, for the amount of insurance the deceased purchased. Depending on the policy, the beneficiary may be able to choose different options for paying out the death benefit, such as a lump sum or installment payments. It's important to understand the tax and financial implications of each option before making your decision.
How Can Making a Claim Affect Your Policies and Premiums?
Filing a claim may or may not affect your policy premiums depending on your insurance company, the type of insurance and the specifics of the claim. For example, some home and auto insurers give you a discount if you go a certain number of years without filing a claim; file a claim, and you'll lose that discount.
Whether an auto insurance claim causes an increase in premiums depends on a variety of factors, such as whether the claim is over a specific dollar amount, whether the incident is determined to be your fault, your overall driving record and your previous claims history.
In the case of homeowners insurance, insurance losses associated with the home in the past five years—even if you didn't own the home at the time—can indicate a higher likelihood of future claims. If your home's previous owner filed a hurricane damage claim two years ago, for instance, and you file a claim this year, it may suggest the home is at high risk from hurricanes. Multiple burglary claims may indicate that you're in a high-crime area or aren't taking proper precautions to protect your home. Either situation could lead to a rate increase.
Health insurance premiums work very differently. The Affordable Care Act prohibits insurers from raising an individual's rates based on his or her health. Any rate increases must be based on the overall "risk pool" the individual belongs to.
Every year, health insurance companies assess how much care for different risk pools cost that year, estimate how much those costs will change in the coming year, and base premiums on those calculations. If your insurance company estimates that costs for women aged 30 to 35 will go up next year, for example, and you're a 33-year-old woman, your rates will go up whether you filed one claim or 100.
Do Insurance Claims Affect Your Credit Score?
Filing any type of insurance claim will not directly impact your credit score. However, if the claim has negative financial consequences, it could indirectly lead to knocks on your credit. For example, having to pay a high deductible or higher insurance premiums could make it difficult to manage your other bills. You might start missing payments, which can have a significant negative impact on your credit score.
Opting for a higher deductible is one way to lower your insurance premiums, but you should always be sure you could easily pay the deductible if you had to. If you're concerned that financial difficulties due to insurance claims may have affected your credit, check your credit report and score to see where you stand.