Insurance Claims

You contact an insurance agent, undergo the underwriting process, and pay insurance premiums year after year. No one wants to have to make an insurance claim. It means that you have experienced loss. Each day, people file:

• Health insurance claims
• Auto insurance claims
• Life insurance claims
• Homeowners insurance claims

Before starting the insurance claim process, it's important to remember that an insurance claim may take some time to resolve. Understanding how a typical insurance claim proceeds can help you trust the process. It also allows you to know when to get legal advice regarding an insurance claim.

FindLaw's Insurance Claims section covers the basics of insurance claims, including the process for appealing a denied claim, how to sue an insurer for acting in bad faith, whether you need an attorney to help protect your rights, and much more.

Insurance Claim Process

The insurance claims process differs from one type of insurance to the next. This is the case whether discussing car insurance, home insurance, life insurance, renter's insurance, or healthcare insurance. There are common characteristics, though.

1. Sustaining a Loss

The insurance claims process begins when the policyholder suffers a loss. These losses can include the following:

• Damaged property through a natural disaster or caused by a fire
• Injury
• Illness
• The death of a loved one
• A lawsuit

Losses can occur as a result of any number of incidents or events.

2. Reporting the Incident and Making a Claim

Someone needs to notify the insurance company about a loss. Most of the time, this will be the policyholder. There are instances where this is not possible, such as when a beneficiary or other family member notifies the life insurance company through a formal request for a death benefit. 

In the case of workers' compensation when you are injured on the job, the process has its own set of rules.

When you are in an accident or experience a loss, one of your first steps should be to inform your insurance company. Depending on the type of incident, you may also want to file a police report. This is a necessity if you were in a car accident or suffered a loss due to theft, burglary, or fire.

It's critical to contact your insurance company as soon as possible. You have a limited period to report the incident to be eligible for reimbursement. Review your policy to understand applicable time limits. Otherwise, you may risk losing your right to file a claim.

Reporting an Automobile Accident

There may be circumstances where the relative fault of those involved in a car accident determines which insurance company you must contact. For example, if you were in a car accident that was entirely your fault, you'll want to contact your insurance agency.

Contact the other person's insurance company if another driver hit you and was at fault. It's important to obtain contact information for those involved in an accident, including any witnesses.

If fault is shared, or it's unclear who was at fault, it's a good idea to contact an attorney first to explore your options and protect your interests. Your attorney will help determine if there's a third-party insurance carrier to contact. They can help you every step of the way.

3. Investigating by the Insurance Company

After the insurer receives a formal complaint or claim form, the insurer investigates the claim. The insurer must confirm the claim's legitimacy and determine the payout amount. Specific claims may be automatic. Routine claims can occur when you fill a prescription or visit your doctor.

Other claims operate in their own way. For example, the insured must take the initiative and file a claim concerning car accidents or property damage. The insured may be required to pay a deductible before coverage begins to pay.

Insurance Claims Adjusters

Once your insurance company receives a claim, it appoints an insurance adjuster. The role of an insurance adjuster is to:

• Investigate the claim
• Determine the amount of loss suffered
• Determine if you are eligible for payment under your policy

The insurance adjuster assigned to your case will commence an investigation. The adjuster will want to interview you about how the accident occurred.

Keep in mind that it's normal for this conversation to be recorded. Under certain circumstances, you should speak with an attorney before giving a statement to an insurance company.

Your adjuster may also interview witnesses and want to review photographs and other relevant documents, such as police reports. Be sure to retain copies of any pictures or other important documents.

If the claim involves your homeowners' policy for damage to your home, the adjuster may visit your home. The adjuster assesses the damage to determine the actual cash value or replacement costs. In some home damage cases, you may get an advance toward the total amount your insurance provider will pay out for personal property recovery or immediate repairs.

It's a good idea to keep in contact with your insurance adjuster during the process. Respond to all requests and follow up to appraise your claim's status. Keep in mind that your appraiser works on several claims at once. The claim process may move slower than you wish.

4. Resolving the Claim

Once the insurance adjuster has completed the investigation, they will resolve your claim by either:

• Approving your claim and giving you payment in full
• Approving your claim but only giving partial payment
• Denying your claim

Approving Your Claim in Full

If your insurer pays your claim in full, you'll be made whole again. The insurance claim process is complete. You must sign a release stating that if you accept a claim payment, you won't be able to bring another claim or lawsuit in the future based on the same circumstances.

Partially Approving Your Claim

When the amount of damage you sustained exceeds the limits of your policy, or some element of your claim is outside of the scope of your policy, your insurance company may only reimburse you in part. Partial approval may occur for the following reasons:

• You did not file your claim within the period specified in your policy
• You failed to submit to a medical exam
• Your particular policy did not cover the accident or incident in question

For various reasons, your insurance company may deny your claim altogether.

Claim Denial

The insurer may deny the claim. Reasons to deny a claim could include that the claim isn't covered or the insurer determines the claim is not legitimate. The policyholder has an opportunity to appeal the denial.

The appeals procedure differs depending on the insurance company. Review your policy carefully to be sure you comply in full with the appeals process.

Insurance Bad Faith and Other Claims

Insurers must follow through on their contractual obligations. The insurance agreement outlines the parties' obligations. The insurer may be liable for a legal claim when the insurer:

• Fails to cover something that should be covered
• Fails to pay the total amount
• Otherwise reneges on its end of the agreement

The legal claim would take the form of an insurance bad faith insurance claim against the insurer for violating its duty of good faith and fair dealing.

Insured individuals may also pursue breach of contract claims when the insurer explicitly violates the contract terms. There is substantial overlap between bad faith claims and breach of contract claims.

Other causes of action may include:

• Violations of fraud statutes
• Violations of insurance codes
• Estoppel (reliance on the words or conduct of an individual rather than a written agreement) for an agent's misrepresentation of coverage

It always pays to understand your rights and obligations as a consumer concerning insurance claims.

Get Legal Help With an Insurance Claim

Insurance claims can go according to plan, but sometimes they don't. You should speak with an attorney if you are experiencing issues with an insurance claim or have questions about the process. Contact an insurance law lawyer to learn more.