The Insurance Claim Process: A Guide To How Claims Work
Some homeowners go their entire lives without needing to make an insurance claim. When disaster strikes, however, you need to know how to properly file an insurance claim and the entire claim process that follows. Most home or business owners have never read their entire insurance policy, or, if they did, they don’t understand it in it’s entirety.
That’s why we’re providing this guide of the most important things you need to know about how insurance claims work, including the typical process for how a home insurance claim proceeds. Here are the 10 steps in the process to most insurance claims:
Step 1: Take Photos and Document Everything
Before ANY action is taken, be sure to properly document all damage with photos and video if possible. If you don’t have proof that the damage actually occurred and you make temporary repairs, they may be denied or underpaid. Do not throw anything away until it has been inspected by your insurance company.
Take photographs of everything related to your claim – from damaged items to pictures of your home’s interior to anything else that was affected. If you’re filing a claim for hailstorm damage, take a photo of any remaining hail on your property to show the insurance company the size of the hail that hit your home.
Ultimately, you may not need all of the photos you took. However, it’s never a bad idea to photograph and document everything, and it’s much better to have too many photos than not enough. It can have a big impact on helping the claim process resolve smoothly, and can even be the difference between a successful and unsuccessful claim.
Step 2: Secure the Scene
(Without Jeopardizing your Safety)
An important step to a property damage insurance claim is to secure the scene. Whether it’s a flood, a fire, or any other damage, it is your duty as an insured to minimize damage if possible. Call emergency services if necessary.
Do not put your life at risk to secure your home. Don’t walk outside to fix your roof in the middle of a hurricane, for example. However, once the storm has passed, consider putting a tarp on your roof to minimize water intrusion (assuming it’s safe to access your roof).
If you experience a covered event and let the damage permeate throughout your home without taking action, then you could face problems with your insurance claim. If your home floods and you ignore the damage for several days and allow mold to develop, for example, then you might have trouble getting the incident covered.
It’s important to remember that you should not actually attempt to make repairs. Instead, focus on stabilizing the damage. If the damage is serious, a professional remediation and restoration company should begin the restoration process.
If you can safely do so, secure your property. Once you’ve done that, you can proceed with the next step.
Step 3: Contact Your Insurance Company and Start a Claim
All insurance companies have well-established home insurance claims processes that begins with filing a claim. Typically, there’s a phone number you can call to begin the claims process. However, some companies will allow you to start by filing a claim online or over a mobile app.
It is important to note that if you think that you may need the services of a public insurance adjuster (your own private adjuster to represent you), it is best to consult with them before opening a claim. Many adjusters have a certain process that they go through that helps them in receiving a fair claims settlement the first time the insurance company comes out.
The sooner you can contact the insurance company and start a claim, the better. However, in some situations you may first be faced with deciding if you should file a claim on your insurance policy.
When filing an insurance claim, only provide true facts that you are absolutely sure of in regards to the incident. Don’t assume, guess, or declare anything that you are uncertain of about your loss and damages, or the cause of loss – doing so can potentially complicate or harm your claim settlement.
Depending on your situation, your insurance company might immediately provide you with emergency funds. If your home has burned down and you need to stay in a hotel for the foreseeable future, for example, then your insurance company might immediately transfer money to your account to provide for short-term expenses. Make sure you keep the receipts for everything you spend during this period.
These emergency funds can also be used to begin the restoration process. A restoration crew might need payment immediately, for example. Your insurance company might ask you to work with a specific restoration company.
Sometimes, these emergency funds are grouped under “ALE”, or “additional living expenses”. These expenses cover hotels, car rentals, meals, and other expenses incurred while your home is unlivable.
Step 4: Check and Understand your Insurance Policy
After starting your claim, there’s never a better time than now to check your insurance policy. A homeowner that understands the policy start to finish is better equipped to deal with the insurance company moving forward.
Read your policy to understand exactly what is covered. The policy might have a section specific to your type of incident – like a fire, flood, wind or hail. Read that section carefully.
Insurance policies are required to be written in plain English – not “legalese”. Your insurance policy should clearly state the terms of your coverage in a way that’s easy for anyone to understand. Unfortunately this is not always the case, and there is often ambiguous wording that may lead you to believe something might not be covered. However, an experienced public adjuster might be able to better interpret the meaning of this policy language to actually cover your loss.
Step 5: Start Filing Paperwork
Every insurance claim comes with it’s fair share of paperwork. This paperwork is a hassle – but it’s a necessary hassle. Your insurance claim process might require you to complete proof of loss forms and other documents.
Be sure to take the necessary time to complete this paperwork in thorough detail and only provide accurate and true information that you are fully certain about.
Step 6: Consider Requesting Your Own Estimation
Some homeowners will perform an independent estimation at this point. If there is damage to a roof, for example, then they may contact a local roofing company asking to estimate the cost of repairing the damage.
This gives you a good idea of the potential value of your claim moving forward. It also makes it harder for an insurance company or adjuster to take advantage of you.
Do not ever let your insurance company force you into getting three estimates and supplying them to the insurance company. This is never in your best interest, and quotes or estimates should only be used once the insurance company has not paid the full amount for your loss.
Step 7: Wait for the Adjuster to Evaluate the Claim
After you start the claims process with your insurance company, the insurance company will send a claims adjuster to your property to begin the evaluation process. The claims adjuster will evaluate your claim to determine how much compensation you should receive and whether or not the incident will be legitimately covered by your policy.
The insurance adjuster will arrive at your premises to complete an inspection. The adjuster wants to ensure the damage legitimately occurred during a covered incident. The adjuster also wants to verify how much it will cost to restore the damage to its pre-loss condition. It is always in your best interest to have someone that represents you, not the insurance company, present for this inspection.
For more in depth details on handling your home insurance adjuster see our guide to dealing with a home insurance adjuster. To find a public adjuster to represent your best interests click here.
If multiple items in your home were damaged, then the insurance company adjuster may also request an inventory of the damaged items. Typically, if the structure of your home was damaged and your personal belongings were damaged, you will receive two separate payments from your insurance company, including one payment to cover your home damage and another payment to cover your belongings.
Step 8: Wait for your Insurance Company to Present an Offer or Deny Your Claim
After the insurance company’s adjuster has visited your property and analyzed your claim, there are two possible outcomes:
- The insurance company will present a settlement offer
- The insurance company will deny your insurance claim
In some cases there may be long delays, requests for more paperwork or proof of loss, or even avoidance and disregard of your claim from the insurance company. In some of these situations it may turn into a bad faith insurance claim.
All insurance companies have a duty to promptly respond and process insurance claims, which is regulated by each state government’s department of insurance. However, this unfortunately is not always what happens and you may come to a point of deciding if involving public adjuster or Attorney is in your best interest.
Step 9: Negotiations and Disputes
After receiving an offer from your insurance company, you can choose to accept or deny that offer. Some homeowners negotiate, claiming that certain items should be covered or that certain damages should be added to the claim.
The negotiation process can be complex – especially if you have limited insurance experience. Insurance companies may use terms like “wind-driven rain” or “cosmetic damage” to justify reducing your claim.
Disputes during the insurance claim process are not uncommon and can quickly become complicated. There could be disputes over what is covered under the insurance policy as well as the value of the items covered under the policy. These disputes in an insurance claim can lead to the processes of needing appraisals, mediation or arbitration.
In other cases, your claim may be totally denied. Your insurance company might have added a clause in your contract that allows them to deny your claim in certain situations, for example.Or, the insurance company might believe you are committing insurance fraud.
If your insurance company has denied your claim or offered you a low settlement, then you may want to hire a public adjuster or an insurance attorney. These professionals put their expertise to work and can negotiate with your insurance company for a higher settlement. They also know far more about insurance than the average policyholder.
Step 10: You Receive Payment from your Insurance Company
If you have legitimately suffered a covered incident, then your home insurance company will send you a check to cover all damages and other expenses according to the terms of your insurance policy. Sometimes, the insurance company will send these funds via a direct deposit.
You will also be required to pay the deductible. Typically, you don’t have to actually send the deductible payment to your insurance company; instead, your deductible is simply “deducted” from your payout, they will however seek confirmation that you did pay the deductible to the contractor of your choice when the repairs were made.
If you experienced $10,000 in damages from hail and wind damage, for example, and you have a $1,000 deductible, then you would receive a payment of $9,000 from your insurance company.
As mentioned above, you may receive multiple checks or payments from your insurance company. You might receive one payment for structural damage to your home, for example, and another payment for the possessions inside your home that were damaged. Additionally, you might receive an initial check to cover emergency expenses experienced immediately after a covered incident.
Other Things to Know About the Insurance Claims Process
Insurance claims vary widely. All types of different situations can arise. Some insurance claims are completed in days based on the steps we mentioned above. Others take weeks, months, or even years to settle. Below, you’ll find several other things you need to know about the insurance claims process and how insurance claims work:
Your Insurance Company Might Pay the Contractor Directly
On some insurance claims, the insurance company and contractor will work directly with one another. In this case, the contractor will ask you to sign a “direction to pay” form. This form allows your insurance company to pay the contractor directly. This is an important form and you should read it thoroughly: by assigning the entire insurance claim to a third party, you are removed from the equation and your contractor is in control. Once the restoration job has been completed to your satisfaction, you can approve the job and the final payment can be sent to the contractor.
This can be a very risky way to have your claim handled and it is not recommended that payment is made directly to a contractor until the work has been completed in agreed upon draw schedules, as the work is ongoing.
Your Lender or Management Company May Have a Say in the Process
If you have a mortgage or if you live in a condo complex with a co-op, then you may be required to list your lender or management company as a co-insured party. When these entities are listed as co-insured parties, it means they have a financial interest in your property. These parties can ensure the necessary repairs are made.
Some lenders, for example, require you to name the lender as an additional named insured in any claims. This is a term in your mortgage.
Many Homeowners Choose to Hire Public Adjusters to Maximize Compensation
One final thing to note about insurance claims is that a growing number of homeowners are choosing to hire public adjusters. A public adjuster is a certified and licensed insurance industry professional dedicated to expediting your claim while securing maximum compensation.
Public adjusters can solve disputes with your insurance company. They can fight for coverage that an insurance company is refusing to cover, or help you get a fair settlement when an insurance company presents an initial low settlement offer.
For all of these reasons, it may be in your best interest to hire a public adjuster to manage your home insurance claim.
Stephanie is a property insurance claim expert with over 20 years of experience working as an insurance adjuster, expert witness, appraiser and umpire. She is passionate about sharing her expertise, knowledge, tips and training to help both property owners and Public Adjusters in their pursuit of effectively managing claims and recovering the claim settlement they deserve after a loss.
