Hopefully you’ll never be hit with a loss. It can be emotionally overwhelming, stressful and confusing. Besides the loss or damages being extremely difficult themselves, the insurance claims process can be extensive and complex. However, these things do happen and the steps to follow can be uncertain. What’s next? Who do you reach out to first? What are your obligations? For this reason, this article will explain the insurance claims process. So if you already are in this situation, or ever find yourself in it, you’ll know what to expect.

What is Insurance Claims Processing? Definition & How it Works

The insurance claim process is the steps taken by an insurer to fulfill its obligation to receive, investigate and act on a claim filed by an insured policyholder. It involves administrative and customer service aspects, like reviewing, adjusting, settling or denying a claim.

The claims process begins when a policyholder files an insurance claim. In essence, claims processing refers to the insurance company’s procedure to check the claim for adequate information, validation, justification and authenticity. At the end of this process, the insurance company may issue a payout to cover the damages repair cost or at least a part of them. Insurers may also deny claims, if found invalid, fraudulent, or outside of the policy terms.

The anatomy of a typical home insurance claims process.

Insurance companies often follow established procedures to resolve and settle claims. Understanding the general process that goes on during the claims process could be of great help to maximize your claim. As well as alleviate the stress that comes with it.

The typical home insurance claims process from beginning to end.

1. Filing the claim is the first part of the insurance claim process

The first part of the claims process is to actually file a claim. You as the policyholder, can submit your claim online, directly through your agent, through claim services, phone call or even email. Hiring a public adjuster could be of great help. They will be with you every step of the way, including before you even start the filing process. In fact, a public adjuster can help you create a detailed list of all the damages and losses in your home before filing in order to quicken your insurance claim process.

2. Assignment of claim professional, also known as insurance adjuster

Secondly, the insurance company assigns a claims professional to your claim. This person is in charge of reviewing your claim as well as estimating damages, losses and repair costs.

3. Initial Contact 

Thirdly, your insurance adjuster gets in touch with you to investigate details about your loss. They will also discuss your insurance coverage and outline how the company plans to handle your claim. Pay attention to advice he/she offers you on how to prevent more damage.

4. Evaluation is a crucial part of the insurance claim process

The insurance adjuster will investigate your claim, collect facts, inspect your claim, interview witnesses if necessary and estimate damages. The adjuster will likely set up a date to visit your home and inspect damages themselves.

Keep a written record of information pertaining to your claim in case questions come up. Try to be present for any visits and make sure to inform the adjusters of any damages or losses they might miss.

Remember, insurance adjusters work for your insurance company and will likely offer you a settlement that benefits the company and not you. This is where a public adjuster comes in handy. Public adjusters know all the tips and tricks that will help maximize your claim. AllCity Public Adjusters work for you and towards your best interest.

5. Resolution of the insurance claim process

Fifthly, if your claim is a simple one, you may receive payment after the first inspection. In more complicated claims, payouts may take longer and negotiations may arise to reach a fair settlement. Public adjusters are expert negotiators that will work their hardest to maximize your claim settlement.

Understanding the insurance claims payment process

The initial payment of the insurance claim process isn’t final

Usually, the insurance adjuster will inspect the damage to your home and offer you a certain sum of money for repairs. Adjuster must base the payout on the terms and limits of your homeowners policy. The first check you get from your insurance company will almost always be an advance from the total settlement amount. This first check is probably not the final payment.

If you’re offered a fair on-the-spot settlement, you can accept the check right away. Regardless, if you find further damage, you can reopen the claim and file for an additional amount. Most policies require claims to be filed within one year from the date of disaster. However, you should verify with your state insurance department or consult your policy to confirm timelines.

You may receive multiple checks during the insurance claim process

Your insurance company will generally issue two separate checks, when both the structure of your home and your personal belongings suffer damage. This is so you can cover each category. If your home is uninhabitable, you’ll also receive a check for additional living expenses (ALE). This check is meant to cover the expenses you incur on if you can’t live in your home while it is being repaired. An ALE check can be used on things like hotel rooms, rent, eating out, toiletries, etc. If you have flood insurance and experienced flood damage, that means a separate check as well.

Your lender or management company might have control over your payment

If you have a mortgage on your house, the repairs checks are generally made out to both you and the mortgage lender. Lenders usually require that they are named in the homeowners policy and that they are a party to any insurance payments related to the structure.

Likewise, if you live in a coop or condominium, your management company may have required that the building’s financial entity be named as a co-insured. When a financial backer is a co-insured, they will have to endorse the claims payment check before you can cash it.

In some instances, lenders may put the money in a retained account and pay for the repairs once the work is done. Show the mortgage lender your contractor’s bid and let the lender know how much the contractor wants upfront to start the job. It is possible that your mortgage company considers bids inadequate and may solicit negotiations or even demand you hire contractors they have worked with before. A lender may also want to inspect the finished job before paying the contractor.

If the home is a total loss, settlement and who gets the settlement or how it’s divided is determined by your policy type. Your policy outlines the specific limits and the terms of your mortgage.

Your insurance company may pay your contractor directly 

Some contractors may ask you to sign a “direction to pay” form that allows your insurance company to pay the firm directly. This form is a legal document, so you should read it carefully to be sure you are not also assigning your entire claim over to the contractor. When in doubt, call your insurance professional before you sign.

Your ALE check should be made out to you

Your check for additional living expenses (ALE) has nothing to do with repairs to your home. Be sure this check is made out to you alone and not your lender. As aforementioned, ALE checks cover your expenses for hotels, car rental, meals out and other expenses you may incur while your home is being fixed.

Your personal belongings will first be calculated on cash value in the insurance claim process

You’ll have to submit a list of your damaged belongings to your insurance company. Having a home inventory beforehand, will make this a lot easier. Even if you have a replacement value policy, the first check you receive from your insurer will be based on the cash value of the items. However, this type of payment is the depreciated amount based on the age of the item. Why do insurance companies do this? It is to match the remaining claim payment to the exact replacement cost. If you decide not to replace an item, you’ll be paid the actual cash value amount for it.

You must actually replace items to get replacement value for your items.

Most insurance companies require you to purchase replacements in order to fully reimburse you for the damaged items. Your insurer will ask for proof of purchase, such as receipt copies. Only then, will they pay the difference between the cash value you initially received and the full cost of the replacement. Keep in mind the item you purchase as replacement must be of similar size and quality. Insurance companies usually give you a deadline of several months from the date of the cash value payment to purchase replacements. For this reason, you should consult with your agent regarding the timeframe.

In the case where the home and it’s contents are classified as a total loss, insurers generally pay the policy limits.

6. Claim closing is the final part of the insurance claim process

Finally, your claim is resolved and closed by the insurance company.

However, you may contact your claims professional at any time if you have questions. You could even reopen your claim if further damages arise due to the original source of the claim.

If you have a replacement cost policy, you will probably receive two or more payments. The initial payment will be for the actual cash of certain items. The remaining amount can be claimed once the other items are replaced.

Tips for optimizing the insurance claim process:

• File your claim as soon as possible
• Keep your claim number and contact info at hand
• Make sure to meet deadlines
• Submit all the required forms
• Respond promptly to queries
• Attend inspections of the damage

An Insurance Claim Process Could Develop Differently

Every claim is different and the claims process could vary from case to case. However, your insurance adjuster should devote the time and attention it takes to resolve your particular situation. A good public adjuster will make sure this is the case and will be extra.