What Is An Insurance Claim & How Do They Work?

Insurance claims

Have you ever been left scratching your head after suffering damage or a loss, unsure of how to seek compensation from your insurance company? 

Filing an insurance claim can feel like navigating a maze, with complex processes and confusing terminology. 

We will help you with insurance claims, walking you through what they are, how they work, and equipping you with the knowledge to tackle the claims process confidently.

What Is an Insurance Claim?

An insurance claim is a formal request made by a policyholder to their insurance company for compensation or coverage for a specific loss or damage. 

It is the process by which you seek reimbursement or payment for an event that is covered under the terms of your insurance policy. 

Insurance claims are a crucial part of the insurance system, as they allow policyholders to receive the benefits they are entitled to when an unexpected or unplanned event occurs.

In simple terms, an insurance claim is a request for the insurance company to fulfil its obligations as outlined in the policy contract. This could involve paying for medical expenses, repairing or replacing damaged property, or providing financial support in the event of a covered loss.

How an Insurance Claim Works

The process of filing an insurance claim typically involves the following steps:

  1. Notify the insurance company: As soon as a covered event occurs, you must promptly notify your insurance company. Most policies have specific time frames within which you must report the claim.
  2. Provide information and documentation: Your insurance company will require you to provide detailed information about the event, as well as any supporting documentation, such as police reports, medical records, or repair estimates.
  3. Claim evaluation: The insurance company will assign a claims adjuster to investigate and evaluate the claim. The adjuster may inspect the damaged property, review medical records, or conduct interviews to determine the extent of the loss and the amount of coverage available.
  4. Claim decision: Based on the evaluation, the insurance company will decide whether to approve or deny the claim. If approved, they will determine the amount of compensation to be paid based on the policy limits and coverage.
  5. Payment or resolution: If the claim is approved, the insurance company will issue payment or arrange for the necessary services to be provided, such as repairs or medical treatment.

Types of Insurance Claims

Insurance claims can be categorised into several types, depending on the nature of the covered event and the type of insurance policy involved. 

Common types of insurance claims are health, property or life inssurance claim.

Health Insurance Claims

Health insurance claims are filed when policyholders seek reimbursement for medical expenses, such as doctor visits, hospital stays, surgeries, or prescription drugs. These claims can be filed directly by the policyholder or by the healthcare provider on their behalf.

Property and Casualty Claims

Property and casualty insurance claims involve damage to physical property or liability for accidents. Examples include claims for home or vehicle damage, theft, or injuries caused to others. These claims are typically filed with homeowners, auto, or liability insurance policies.

Life Insurance Claims

Life insurance claims are made by the beneficiaries of a life insurance policy when the insured person passes away. The claim process involves providing proof of death and other required documentation to receive the death benefit payout.

Related: How Can I Find My National Insurance Number Online in the UK

How Do I Initiate an Insurance Claim?

To initiate an insurance claim, you should follow these general steps:

  1. Review your insurance policy to understand the coverage and requirements for filing a claim.
  2. Gather all relevant documentation, such as police reports, medical records, or repair estimates.
  3. Contact your insurance company’s claims department, either by phone or through their online portal.
  4. Provide the necessary information and documentation to the claims representative or adjuster assigned to your case.
  5. Cooperate with the insurance company throughout the claims process, providing additional information or access as needed.
  6. Follow up on the status of your claim and ensure all necessary steps are taken to resolve it.

Why Does Filing a Claim Increase Insurance?

Filing an insurance claim can lead to an increase in your insurance premiums for several reasons:

  1. Risk assessment: Insurance companies assess the risk of future claims based on your claims history. More claims filed may indicate a higher risk of future losses, prompting the insurer to increase premiums to compensate for the potential payouts.
  2. Claims payouts: When an insurance company pays out a claim, it incurs a cost. To offset these costs and maintain profitability, insurers may raise premiums for policyholders who have filed claims.
  3. Policy renewal: At the time of policy renewal, insurance companies typically review your claims history and adjust premiums accordingly. If you have filed a claim during the previous policy period, your premiums are likely to increase.
  4. No-claims discounts: Many insurance policies offer discounts for policyholders who have not filed claims for a certain period of time. Filing a claim may result in the loss of these discounts, effectively increasing your premiums.

Should I File an Insurance Claim if the Damage Is Less than My Deductible?

Whether to file an insurance claim when the damage is less than your insurance deductible is a personal decision that depends on various factors. 

Some considerations can be:

  1. Claim history: Filing a claim, even if the payout is less than the deductible, can affect your claims history and potentially lead to higher premiums in the future.
  2. Claim-free discounts: Filing a claim may cause you to lose any claim-free discounts you currently enjoy, which could offset the potential payout.
  3. Future costs: If the damage is minor, it may be more cost-effective to pay for the repairs out of pocket rather than filing a claim and risking potential premium increases in the future.
  4. Policy limits: Some insurance policies have limits on the number of claims you can file within a certain period, so filing a claim for a minor issue may impact your ability to claim for more substantial losses in the future.

It’s generally advisable to consult with your insurance agent or company to understand the potential consequences of filing a claim for a small amount relative to your deductible.