What is an insurance claim?

Mon Mar 19 2018

a tablet displaying a insurance claim form

Learn what an insurance claim is and when to file one.

It’s troubling to think that the home you are so invested in could one day become damaged or destroyed. Choosing a quality insurance policy will set you up for success in the event of a disaster.

Accidents happen. This article will equip you with the tools you need to file an insurance claim so that, when that flood strikes, you will be able to continue to equip your life with the stability and comfort your family needs.

How insurance claims work

An insurance claim is a reimbursement for property damage by a homeowners insurance company based on the terms of their insurance policy. Homeowners pay a monthly fee or premium to their insurance company in exchange for the assurance that the insurance company will reimburse them for damage from a disaster. When a disaster strikes, the homeowner files an insurance claim with their insurance company. The homeowner will need to compile a list of receipts and expenses and send that to their insurance company with their claim.

An adjuster will then be assigned to inspect the damage and report back their assessment to your insurance company, which will base their approval or denial of the homeowner's claim on the adjustor’s report. Of course, the first step to having recourse to a claim when disaster strikes is to prepare with the right type of policy and documentation beforehand.

How different policies impact insurance claims

Did you know there are nine different types of homeowners insurance? Whether you are renting or an owner, own a mobile home or are part of a co-op or condo will influence what kind of insurance you choose. The region where you live should also impact this decision.

HO-1: This policy protects a home against 11 disasters including fire and lightning; windstorms and hail; explosion; riots and civil commotion; aircraft; vehicles; smoke; vandalism and malicious mischief; theft; glass that is part of the home; and volcanic eruptions.

HO-2: This policy includes: damage from falling objects, water accidental overflow of plumbing, heating air-conditioning, and household appliances. Everything included in HO-1 is also covered.

HO-3: This is the most common policy as it is the most all-inclusive. It includes all the disasters contained in HO-1 and HO-2 and also: Overflow of freezing pipes, heating, A/C, or other household appliances, Tears, cracks, and burns in water heaters, A/C. or sprinkler systems, damage from electrical currents in appliances and wiring, all other perils except those specifically excluded in policy, floods, earthquakes, and sinkholes— the last three are purchased in a policy specific to that disaster.

HO-4: is for a renter’s belongings, personal liability, and loss of use.

HO-5: This is the most comprehensive policy and includes all disasters in HO-3 plus maximum coverage for personal belongings as well as every and all disaster not specifically excluded by the policy.

See more types of insurance policies.

When purchasing a homeowners policy it’s important to be aware of the laws in your state; Each state is different. Some states are more prone to natural disasters than others and each state is prone to a different set of natural disasters. Therefore, the laws of each state have been created to indicate whether homeowners need to have protection against hurricanes, floods, earthquakes, etc. accordingly.

For instance, Florida and Texas are two states that have perhaps the highest proclivity for natural disasters including hurricanes, tornadoes, and floods. Florida suffered the most from Hurricane Katrina—the most expensive natural disaster in American history. Meanwhile, Texas sets the record for the most natural disasters in one state at 86.

Case studies: Florida & Texas

One caveat worth bearing in mind is that earthquake, sinkhole, and flood insurance must be purchased separately.

Florida: Hurricane deductibles

Florida provides a particularly nuanced use case because the state’s government requires homeowners to insure against disaster with hurricane deductibles (as do 18 other states).

Texas: Windstorm & hail

According to the Texas Department of Insurance website “The Texas Windstorm Insurance Association (TWIA) is the state's insurer for windstorm and hail coverage. You may buy TWIA coverage through local insurance agents if you need it.”

Filing an insurance claim

Now we get to the crucial part: filing the insurance claim itself. Before disaster strikes, it’s important to keep an inventory of the receipts of all your valuables, mortgages, etc. in a disaster-proof safe. Disaster strikes. Continue to record all of your activities, including:

(1) Damaged items even if they are destroyed

(2) The amount required for temporary housing and relocation

(3) Prior receipts in your off-site/disaster proof safe

(4) Any additional living expenses that arise as a result of the damage

To file or not to file an insurance claim?

Believe it or not, sometimes it’s good not to file an insurance claim. If the cost of the claim is bigger than the deductible, it is almost never worth it. This may result in a significant hike in your premiums. This is especially true if you file more than one claim a year. Insurance claims are for large disasters after all, and typically aren’t worth the hike in premium otherwise.

How to file a homeowner insurance claim

Plan in advance
Keep a record of all valuables with serial numbers in a fireproof safe
File your claim within 60 days
Contact your mortgage lender
Be aware that your mortgage fees will be deducted from your payout
Keep receipts from repairs & lodging
Be aware of state laws affecting insurance premiums
Hire a public adjustor

Wait too long
Dispose of damaged items
File with an unreliable policy


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