What is Insurance Claim?

An insurance claim is when a policyholder formally asks an insurance company for coverage or compensation for a loss or event covered by their policy. The insurance company will review the claim and either approve or deny it. If approved, the insurance company will make a payment to the insured or an approved party on their behalf.

Insurance claims can include various things like life insurance benefits and medical exams. Sometimes, someone else can file a claim for the insured person. But usually, only the people named on the policy can receive the payments.

How It Works

A paid insurance claim serves to indemnify a policyholder against financial loss. People or groups pay premiums to enter into an insurance contract with an insurance company. The most typical insurance claims cover expenses for medical services, physical damage, loss of life, liability for owning homes (homeowners, landlords, and renters), and liability from car accidents.

The rate you pay for property and causality insurance policies is directly affected by the number of claims you make, regardless of the accident’s extent or fault. These claims are usually paid through insurance premiums in installments. If you file a higher number of claims, there is a higher chance of your rate increasing. In certain situations, if you file too many claims, the insurance company may even deny you coverage.

If you’re responsible for the damage, your insurance rates will likely go up. However, if you’re not to blame, your rates might stay the same. For instance, accidents like being rear-ended while parked or having your siding damaged in a storm are clearly not your fault.

However, there are factors that can increase your rates, such as the number of previous claims you have made, 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. These factors can cause your rates to go up, even if the most recent claim was not your fault.

Not all insurance claims are the same when it comes to rate increases. Dog bites, slip-and-fall injuries, water damage, and mold can signal future liability for an insurer. These can lead to higher rates and a decreased willingness to provide coverage. Interestingly, speeding tickets may not always result in a rate increase. Some companies may not raise prices for your first speeding ticket. The same leniency may apply to minor car accidents or small claims on your homeowner’s insurance.