Insurance Claim: What It Is And How It Works


Insurance Claim is a request form that an insured person prepares and present to the insurance company or their policy provider. An insurance claim is a formal request by a policyholder to an insurance company for coverage or compensation for a covered loss or policy event.

Insurance Claim

Insurance Claim

An insurance claim is often made after an incident takes place, that’s covered by the insurance policy. Insurance claim payment is always used to replace or repair a property or pay for health care costs related to an injury. Let’s see more on insurance claims in this article.

What Is an Insurance Claim?

An insurance claim is a formal request by a policyholder to an insurance company for coverage or it is a compensation for a covered loss or policy event. The insurance company validates the claim (or denies the claim). If it is approved, the insurance company will issue payment to the insured or an approved interested party on behalf of the insured.

Insurance claims are an embodiment of many policies. It covers everything from death benefits on life insurance policies to routine and comprehensive medical exams. Also, in some cases, a third-party can file claims on behalf of the insured person. However, in the majority of cases, only the person(s) listed on the policy is entitled to claim payments.

The insurance company validates the claim and, once approved, issues payment to the insured or an approved interested party on behalf of the insured. For property-casualty insurance, such as for your car or home, filing a claim can cause rate hikes to your future premiums.

Insurance Claim: How Does It Works

A paid insurance claim serves to indemnify a policyholder against financial loss. An individual or group pays premiums as consideration for the completion of an insurance contract between the insured party and an insurance carrier. The most common insurance claims involve costs for medical goods and services, physical damage. Also, including loss of life, and liability for the ownership of dwellings (homeowners, landlords, and renters), and liability resulting from the operation of automobiles.

For property and causality insurance policies, regardless of the scope of an accident or who was at fault. The number of insurance claims you file has a direct impact on the rate you pay to gain coverage (typically through installment payments called insurance premiums). The greater the number of claims that are filed by a policyholder, the greater the likelihood of a rate hike. In some cases, it’s possible if you file too many claims that the insurance company may decide to deny you coverage.

If the claim is being filed based on the damage to property that you caused. Your rates will definitely rise. On the other hand, if you are not at fault. Your rates may or may not increase. For example, if you are hit from behind when your car is parked. Or having siding blow off your house during a storm are both events that are clearly not the result of the policyholder.

However, mitigating circumstances, such as the number of previous claims you have filed. The number of speeding tickets you have received, the frequency of natural disasters in your area (earthquakes, hurricanes, floods). And even a low credit rating can all cause your rates to go up. Even if the latest claim was made for damage you didn’t cause.

When it comes to insurance rate increases, not all claims are created equal. For instance, Dog bites, slip-and-fall personal injury claims, water damage. And mold can all act as signals of future liability for an insurer. These items have a negative impact on your rates and on your insurer’s willingness to continue providing coverage. Surprisingly, speeding tickets may not cause a rate hike at all. At least for your first speeding ticket. Many companies will not increase your prices. The same goes for a minor automobile accident or a small claim against your homeowner’s insurance policy.

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