An insurance claim is a formal request for coverage or compensation for a covered loss or policy event made by a policyholder to an insurance company. The insurance provider verifies the claim (or denies the claim). If the claim is approved, the insurance company will issue payment to the insured or an approved third party on the insured's behalf.
What Is an Insurance Claim

The scope of insurance claims ranges from death benefits on life insurance policies to routine and exhaustive medical exams. In certain instances, a third party can file claims on behalf of the insured. However, in the vast majority of instances, only those named on the policy are eligible for claim payments.

• An insurance claim is a formal request for coverage or compensation for a covered loss or policy event made by a policyholder to an insurance company.

• The insurance company verifies the claim and, if approved, sends payment to the insured or an approved third party on the insured's behalf.

• Filing a claim for property-casualty insurance, such as for your car or home, can result in future premium increases.

How Insurance Claim Works

A paid insurance claim indemnify the policyholder for financial loss. As consideration for the completion of an insurance contract between an insured party and an insurance carrier, a person or group pays premiums. The most prevalent insurance claims involve costs for medical goods and services, physical damage, loss of life, liability for the ownership of dwellings (homeowners, landlords, and renters), and liability resulting from automobile operation.

Regardless of the severity of an accident or who was at fault, the number of property and liability insurance claims you file has a direct effect on the premium you pay for coverage (typically through installment payments called insurance premiums). The greater the number of claims a policyholder files, the greater the likelihood of a premium increase. In certain instances, if you submit too many claims, the insurance company may decide to deny coverage.

If the claim is based on property damage you caused, your premiums will almost certainly increase. If you are not at fault, however, your rates may or may not increase. For instance, being struck from behind while your car is parked or having your home's siding blow off during a storm are clearly not the policyholder's fault.

However, justifying circumstances, such as the number of previous claims you have filed, the number of speeding tickets that  you have received, the frequency of natural disasters in your area (earthquakes, hurricanes, and floods), and even a low credit score, can cause your rates to increase, even if the most recent claim was for damage you did not cause.

Regarding insurance premium increases, not all claims are created equal. Dog bites, slip-and-fall personal injury claims, water damage, and mound can all serve as indicators of an insurer's future liability. These factors typically have an adverse effect on your premiums and your insurer's willingness to continue providing coverage. Surprisingly, speeding tickets might not result in any rate increase. Many companies will not increase your rates for your first speeding ticket. The same holds true for a minor auto accident or a small homeowner's insurance claim.

Types of Insurance Claims

Health Insurance Claims

Surgical procedures and hospital stays continue to be prohibitively expensive. Individual or group health insurance protects patients from financial burdens that could otherwise cause irreparable financial harm. Patients' participation in the filing of health insurance claims by providers on behalf of policyholders is minimal; the majority of medical claims are adjudicated electronically.

When medical providers do not participate in electronic transmissions but covered services are rendered, policyholders must submit paper claims. Ultimately, an insurance claim protects a person from the possibility of incurring significant financial burdens due to an accident or illness.

Property and Casualty Claims

A home is typically one of the most valuable assets an individual will acquire during his or her lifetime. A claim submitted for damage caused by covered perils is initially forwarded via the Internet to a representative of an insurer, also known as an agent or claims adjuster.

Unlike health insurance claims, the policyholder has its responsibility for reporting damage to their deeded property. Depending on the type of claim, an adjuster inspects and evaluates property damage for payment to the insured. The adjuster initiates the process of compensating or reimbursing the insured upon verification of the damage.

Life Insurance Claims

Claims for life insurance require a claim form, a death certificate, and frequently the original policy. The process, particularly for large face value policies, may necessitate a thorough examination by the insurer to ensure that the insured's death did not fall under a contract exclusion, such as suicide (typically excluded during the first few years of policy inception) or death caused by a criminal act.

In the absence of extenuating circumstances, the process typically takes between 30 and 60 days, affording beneficiaries the financial means to replace the deceased's income or cover final expenses.

The filing of an insurance claim may increase future premiums.

Special Considerations

There are no strict guidelines regarding rate increases. What one business forgets, another will not. Understanding your policy is the first step to safeguarding your finances, as even the smallest claim may affect your premiums. If you know that your first accident is forgiven or that a previous claim won't count against you after a certain number of years, you can decide whether or not to file a claim knowing in advance how it will affect your rates.

It is also important to discuss the insurance company's policies with your agent well before you need to file a claim. Some agents are required to report you to the insurance provider if you discuss a potential claim but choose not to file. Inquiring about your insurer's policy regarding consultation with your agent should not be delayed until you need to file a claim.

Regardless of your circumstances, the key to preventing a substantial increase in your insurance rates is to file fewer claims. Rule of thumb is to file a claim only in the event of a catastrophic loss. If your car's bumper gets dented or a few shingles fall off your roof, it may be in your best interest to pay for the repairs yourself.

If your vehicle is totaled in an accident or your home's entire roof collapses, filing a claim becomes more economically feasible. Remember that even if you have coverage and have paid your premiums on time for years, your insurance company can still refuse to renew your policy when it expires.

How to Initiate an Insurance Claim?

If you have suffered damages covered by your insurance policy, you can file a claim by contacting your insurer. This can be accomplished via phone and, increasingly, online. After initiating a claim, the insurer will collect pertinent information from you and may request evidence (such as photographs) or supporting documentation. The insurer may also dispatch an adjuster to conduct an interview with you and assess the validity of your claim.

Why Does Filing an Insurance Claim Raise Premiums?

Occasionally, filing a claim can result in future increases in insurance premiums. However, this is not always the case, as some insurers will overlook a first accident, for instance. After filing a claim, your premiums will increase primarily because the insurer will view you as a greater risk and adjust your premiums accordingly. If you can demonstrate that you were not at fault for a claim, you may be able to reverse the increase. The insurance company may not renew your policy if you file too many claims in a short period of time, regardless of fault.

Can I File a Claim if the Damage Is Less Than My Deductible?

If the damage is less than your deductible, it may not be worthwhile to file a claim with your insurer. For instance, it makes no sense to have an estimated $400 in damage but a $1,000 deductible. If you believe that the other party is solely at fault and you want their insurance to cover your damages, you may wish to file a claim. Before filing a claim, it is always a good idea to consult your insurance agent.