Insurance Terms You Should Know Before Filing A Claim
Insurance Terms and Concepts You Need to Know Before Filing a Claim
Events that lead to insurance claims are often stressful and overwhelming. Adding to that stress can be the insurance claim process itself, which involves terms and concepts that may feel like another language. But knowing these key insurance terms before you file can help reduce the anxiety, making the entire process smoother.
While your independent insurance agent is always available to help, it’s good to have a solid grasp of these concepts beforehand. Keep this as a reference guide for when you need it most.
Independent Insurance Agent
An independent insurance agent is a licensed professional who works with multiple insurance carriers, not just one. This gives them the flexibility to offer you a broader range of coverage options and price points compared to agents tied to a specific insurance company. Independent agents work for you, not the insurance companies. Their goal is to find the best policy that meets your needs at the most competitive rate.
Captive Agent
A captive agent, on the other hand, works exclusively for one insurance company. While they can still provide solid advice, they can only offer policies from that particular insurance company. Captive agents are essentially employees of the insurance company and don’t have the same flexibility as independent agents.
Insurance Carrier
An insurance carrier (or insurance company) is the entity that provides your insurance policy. You pay them premiums, and in return, they agree to cover certain losses or damages that occur, depending on the policy you’ve purchased. They take on your financial risk in the event of a covered incident.
Underwriting and Underwriters
Underwriting is the process the insurance carrier uses to assess the risk of insuring you. The underwriter reviews factors like your driving history or health background to determine whether you’re a high or low risk to the company. Based on that assessment, they’ll set your premium rates. Keep in mind, after a claim, your risk rating may increase, which can affect your future premiums.
Claims Representative
When you file a claim, you’ll be assigned a claims representative. This person works for the insurance carrier and will be your main point of contact throughout the process. Their job is to assess your claim, investigate if necessary, and facilitate payment if your claim is approved.
Claims Adjuster
A claims adjuster is the person who investigates your claim and determines how much the insurance company owes you. Adjusters can either be employees of the insurance company or independent contractors. They look at the damage, assess the policy coverage, and negotiate settlements.
Public Adjuster
If you feel the insurance company’s claims adjuster isn’t offering a fair settlement, you can hire a public adjuster. Public adjusters work for you, not the insurance company. They assess your losses, help you navigate the policy details, and negotiate with the insurance company to ensure you’re compensated fairly.
A public adjuster is typically paid through a percentage of the insurance settlement they secure for you. This fee is usually between 5% and 15% of the total settlement, depending on the complexity of the claim, the location, and the size of the loss. In some states, there may be legal caps on how much a public adjuster can charge, especially for claims related to natural disasters.
Public adjusters work on a contingency fee basis, meaning they only get paid if they successfully negotiate a settlement for you. This payment structure aligns their interests with yours, as they benefit from getting you the highest possible settlement. However, it’s important to understand the fee agreement before hiring a public adjuster so there are no surprises after your claim is settled.
If you have a complex or disputed claim, hiring a public adjuster can sometimes help maximize your settlement, but make sure to weigh the cost against the potential benefit.
Premiums and Deductibles
Your premium is the amount you pay—monthly, quarterly, or annually—to keep your insurance policy active. Even when a claim is pending, you must continue paying your premiums to avoid policy cancellation.
A deductible is the amount you must pay out of pocket before the insurance company steps in. For instance, if you have a $500 deductible and $4,000 in damage, you pay the $500, and the insurance company covers the remaining $3,500.
Document Submission
When filing a claim, you’ll need to submit proof of the loss, such as photos, police reports, or witness statements. Keep a detailed record of everything you send to the insurance company.
Claim Processing Time
The time it takes for the insurance company to process your claim can vary. Simple claims might take a few days, while more complex ones could take weeks or months. Throughout the process, your claims representative will keep you updated.
Claim Denial and Appeals
Sometimes, claims are denied if they don’t meet the terms of your policy. The insurance company will provide a written explanation for the denial. If you disagree with this decision, you can file a claim appeal, but you’ll need to act fast—usually within 14 days of receiving the denial notice.
Loss
In insurance terms, a loss refers to damage, destruction, or injury resulting from a specific incident. This could be anything from a car accident to a house fire or even damage to your reputation in a defamation case.
Third Party
A third party is someone other than yourself, or other individuals or entities covered by your insurance. For example, if you get into a car accident, the other people involved are the third parties. Another example is when you damage your neighbor’s property. Imagine you’re mowing your lawn and your lawn mower throws its blade. The blade smashes into your neighbor’s house and damages the siding. In this scenario, your neighbor is the third party. Going further with the example, let’s say you find out your lawn mower model often throws blades due to a manufacturing defect. If you sued the manufacturer, you’d be the third party because you suffered a loss due to their defective product.
Peril and Exclusions
A peril is the event that causes a loss. Common perils include fire, theft, and vandalism. Every policy will outline the perils it covers and the ones it excludes. For example, many home insurance policies exclude flood damage, which means you’d need to purchase separate flood insurance if you live in a flood-prone area.
Replacement Value vs. Actual Cash Value
When it comes to personal property, there are two key terms to know: replacement value (RV) and actual cash value (ACV).
- Replacement value pays you enough to replace the damaged item with a new one of similar quality. So, if a fire destroyed your five-year-old television, you’d get enough money to buy a new TV.
- Actual cash value, on the other hand, accounts for depreciation. Using the same example, if your TV had a “useful life” of 10 years and it was five years old, the insurance company would pay you half the cost of a new TV.
Endorsements and Additional Living Expenses (ALE)
You can resolve some exclusions by buying special insurance to cover them. This special insurance is called an “endorsement” or “rider” or a “scheduled item.” A common example is sewer backup coverage, which protects your property from damage caused by sewer, drain, sump pump or septic system failures.
Another useful add-on is additional living expenses (ALE) coverage, which helps pay for temporary housing and other expenses if your home is uninhabitable due to a covered peril.
Conclusion: Know Your Insurance Terms, Make Confident Claims
Understanding these key insurance terms can make the claims process much less intimidating. Whether you’re dealing with a car accident, home damage, or another type of loss, knowing what to expect helps you feel more in control. And if you ever feel overwhelmed, your independent insurance agent is always there to assist and advocate for you.
Call Huff Insurancet For Help With Key Insurance Terms
This isn’t an exhaustive list of insurance concepts and terms, but it gives you a good start. Your agent at Huff Insurance will help you sort the claims process. We can help you determine if filing a claim is in your best interest.
