An Inside Look at How Insurance Companies Pay Out Claims
Any situation that merits an insurance claim is a stressful one. In fact, the insurance claim process itself can be very overwhelming. Regardless, it is a crucial process you will have to go through in order to get an insurance payout. Knowing the steps can help alleviate some of the worry. Understanding the insurance payouts is also very important since it can help you maximize claims and avoid mishaps or delays. Below we share the details on how the insurance claim process works, from submission to payment. Remember, a public adjuster is an expert insurance professional who will be of immense help during this process. The work for you to help you maximize settlements and protect your rights and interest. Consider hiring a public adjuster to handle your insurance claim today.
First, Filing Your Claim
Before we get into how insurance companies evaluate and pay claims, let’s quickly review how filing a claim works. After the accident, you will want to file your claim as soon as possible. The faster you file, the sooner you’ll get your insurance payout.
Your first step should be to document what happened and file a claim report with your insurance company. While it’s fresh in your mind, write down a full incident report, take photos at the scene and gather the information of anyone present. It is extremely important to mitigate damage as quickly as possible. Keep track of any expenses you incur on to prevent further damage to the home, as well as copy all receipts.
When you report your claim, you’ll want to have the following information readily available:
- Names, email addresses, and phone numbers for the insured and the claimant, if it’s someone other than yourself
- The same contact information for anyone else involved in the claim
- Your policy number
- The date, time, and location of the loss
A description of the loss from your incident report
Any other relevant information you can provide to assist your insurance company with. Once you submit your claim, you’ll receive a confirmation message from your insurance company with a claim number you can reference during any subsequent communications.
Evaluating Your Claim is the Second Step Towards your Insurance Payout
Once you file your claim, your insurance company will begin evaluating it for reimbursement. The amount of time that this part of the process takes depends on the complexity of your claim. Furthermore, the insurance company will likely assign an insurance adjuster to your case in order to carry out this step. They will likely visit your property to assess damages and calculate repair estimates.
Moreover, the insurance company will follow up with you to let you know if they need you to complete additional forms or provide more information. This step becomes a collaborative process between you and your insurance company. To speed things along, make yourself available to the insurer whenever they have follow up questions, and be sure to send them any new information as soon as you get it such as:
- Bills and invoices
- Assessments of damage from vendors and other professionals
- Emails or letters from claimants or others involved in the incident
Keep a copy of all this correspondence, and reference your policy number and claim number on each item as you send it in.
How Damage Is Assessed during a Claim
As aforementioned, an insurance adjuster will likely visit your home to inspect and evaluate the loss. They will consider factors like:
- The square footage that’s damaged.
- Damaged items.
- Whether the damage is repairable or must be rebuilt or replaced.
If you have one, make sure to hand a copy of your home inventory to your adjuster.
Once the adjuster documents all the damage, they use software to determine the value of the damage based on your home’s square footage and construction materials. They also crunch the estimates and receipts you provide to repair or replace damaged items.
Your representative will then review your policy with you, from your dwelling coverage to personal belongings and loss of use to determine your coverage. This is the biggest influence on your insurance payout amount.
Approving or Denying Claims Before Issuing and Insurance Payout
Next, the insurance company will determine whether to approve or deny your claim. Claim denial could occur for a number of reasons:
- The incident took place outside of your policy period
- The type of incident or damage uncovered under your policy
- You filed your claim outside of the time required by your policy
- You have an outstanding payment on your insurance premium
It’s important to read through your policy to fully understand any scenarios in which your insurance company denies your claim. Speak to your insurance about potential exclusions and review your deductibles carefully. If your claim is denied, your insurance company must give you a detailed explanation.
Receiving Your Insurance Payout
If no issues arise and you receive approval for your claim, then the insurance company will determine the amount of reimbursement and issue your payment. However, depending on the nature of your claim, you may receive a check directly, or the insurance company may pay contractors and on your behalf. Furthermore, the total amount you receive depends on the amount of coverage in your policy and the specific details of your claim. Additionally, you may have had to perform temporary repairs. Your insurance company will reimburse you for those costs.
Understanding the Insurance Payout Process
The initial payment probably isn’t final.
As discussed above, an adjuster will inspect the damage to your home and offer you a certain sum of money for repairs, based on the terms and limits of your homeowners policy. The first check you get from your insurance company is often an advance against the total settlement amount, not the final payment. However, if you’re offered an on-the-spot settlement, you can accept the check right away. Later, if you find more damage, you can reopen the claim and file for an additional amount. Verify with your policy to know how long you have to reopen claims.
You may receive multiple checks as your insurance payout.
When both the structure of your home and your personal belongings suffer damage, you generally receive two separate checks from your insurance company. One for each category of damage. If you can’t stay at your home during the repair process, you’ll also receive a check for the additional living expenses (ALE). This check is meant to cover things like temporary living arrangements, toiletries, meals out, etc. Your check for ALE has nothing to do with repairs to your home. For this reason, you should ensure that this check is for you alone and not your lender.
Your lender or management company might have control over your insurance payout
If you have a mortgage on your house, the check for repairs will generally be for both you and the mortgage lender. Lenders usually require the insured to name them in the homeowners policy as a condition for granting the mortgage. Likewise, if you live in a coop or condominium, your management company may have required you name the building’s financial entity as a co-insured. This is so the lender can ensure that the structure is properly repaired since they have financial interest on the property.
A co-insured entity must endorse the claims payment check before you can cash it. Depending on the circumstances, lenders may also put the money on hold and pay for the contractors once the work is complete. Your mortgage company will likely want to approve your contractor’s bid before starting getting any repairs done as well as inspect the finished job before releasing the funds. If your home has been destroyed, your policy type establishes the amount of the settlement and who gets it.
Your insurance company may pay your contractor directly.
A “direction to pay” form is a form that allows your insurance company to pay the contractor’s firm directly. This form is a legal document that your contractor might ask you to sign. But because this is a legal form, 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. Assigning your entire insurance claim to a third party takes you out of the process and gives total control of your claim to the contractor. Make certain the completed repair job is satisfying before you let your insurer make the final payment to the contractor.
First, your insurer will calculate your personal belongings on their cash value
When you buy your policy, you must choose between an actual cash value or replacement cost policy. Whichever you choose will make a big difference in your claim payout. If your is for actual cash value, the claim is paid out based on the property’s depreciated value. However, if you have a replacement value policy, the first check you receive from your insurer will also be for the cash value of the items. Replacement cost coverage offers the amount it takes to replace the item with a new, similar item at today’s market rate. If you decide not to replace an item, the insurance will pay the actual cash value amount for it.
To get replacement value for your items, you must actually replace them. Your company will ask for copies of receipts as proof of purchase, then pay the difference between the cash value you initially received and the full cost of the replacement with an item of similar size and quality. You’ll generally have several months from the date of the cash value payment to purchase replacements. In the case of a total loss, insurers generally pay the policy limits.
What Roles do Deductibles Play on Your Insurance Payout
Your deductible is the amount you cover when you file a claim. If your loss is less than the deductible, you won’t receive any payment from your insurer. On the other hand, if your loss is more than your deductible, you’ll receive the agreed upon payment minus your deductible. For instance, it will cost you $7,000 to repair your flooded basement. If you have a $1,500 deductible, your payout would be $5,500. That means you will have to come up with the $1,500 to pay the contractor to complete the work.
When Should Insurance Claims Be Submitted?
If you suffer a loss, it’s important to file your insurance claim as soon as possible. Most instances, your insurance policy will state when and how you must submit your claim, so you should always refer to this document when facing a claims situation. And, remember, the sooner you put your claim in, the faster you will receive payment.
How Long It Takes to Get a Claim Settlement and an Insurance Payout
Your state’s insurance commissioner outlines in the homeowner claims bill of rights how long an insurance company has to pay your claim. However, the amount of time it takes for your insurance company to pay out a claim is often determined by:
- The complexity of the claim
- The number of individuals involved
- How soon you file your claim
- Whether the insurance company has all necessary documents
- How quickly you can meet with the insurance adjuster
Now You Can Be Comfortable with the Insurance Payout Process
Hopefully you won’t ever have to put your insurance policy into motion by submitting a claim. Nevertheless, should this occur you can now rest easy knowing how to proceed with the claims process and understanding the insurance payout . The insurance payout process will vary amongst insurance companies but this is a pretty general guide of how the procedure works.
Best way to beat the insurance company is to hire AllCity Adjusting
At AllCity Adjusting we help residential and commercial clients alike get the claims support they need. Moreover, we have over 50 years of combined experience helping get our clients the max settlement time and time again. If your claim has been low balled or denied entirely we can help increase your maximum settlement. Call us today for a FREE consultation. Experience the AllCity difference.
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