I get a lot of people who have questions about an insurance claim and do not understand why the claim is handled in a certain manner. Sometimes, the potential client has misunderstood. Sometimes, the adjuster has made a mistake. Sometimes, no one knows what is supposed to happen so no one has any idea what is actually going on. So, here is an overview of how a claim should be handled.
A claim is called in to an 800 number. (Some insurance companies take reports only from agents. Some insurance companies take reports online. Most have an 800 number to call.) A representative takes the basic information: name of the insured, policy number, time and date of the occurrence, etc…. The claim is then assigned a number and an adjuster. The caller should get this information on the phone.
When the adjuster gets a claim, the adjuster is supposed to handle the investigation in three steps:
- Coverage. Is the claim covered? In other words, does the insurance policy have some exclusion that makes it so the event is not covered by the insurance policy. This could be an arson on a homeowners policy or a racing incident on an automobile policy. (Racing in your car on a track is not covered by your auto policy.) The adjuster will go through and determine if there is some reason the policy does not apply to the claim. If the claim is covered, the adjuster goes to step 2. If it is not covered, a denial letter is sent to the insured explaining why the claim is not covered.
- Liability. Is the insured responsible for the damages? On an auto liability policy, the investigation means whether the insured caused the collision. On a homeowners liability claim, ie a slip and fall, the investigation is similar: did the insured do something to cause the incident or fail to do something to prevent it from happening? If the insured is liable, or partially liable, the adjuster goes to step 3. If the insured is not liable, a letter denying liability is sent to the other party.
- Damages. What amount is owed by the policy? In a comprehensive or collision auto claim, the adjuster determines the repair cost, or if the repair cost is 80% or more of the replacement cost, then the replacement cost. In a liability claim for property damage, the adjuster makes the same analysis. In a bodily injury claim, the adjuster has to determine the extent of the injuries and the amount that would compensate the injured party for the injuries. This is where most arguments occur. What is a fair amount? How is it determined?
The short version: coverage, liability damages. Repeat. That is the proper method to handling an insurance claim. If you have an adjuster who wants to talk damages without knowing if the claim is covered, be afraid, be very afraid!
In future posts, I will go into detail on these issues and explain in more detail what should be done.