When a Legal Claim is Filed Against You, What Should You Do?

What Is an Insurance Claim?

A policyholder’s formal request to an insurance company for coverage or compensation for a covered loss or policy event is known as an insurance claim.

The claim is verified by the insurance company (or denies the claim). If the claim is allowed, the insurance company will pay the insured or an authorized interested party on the insured’s behalf.

From death benefits on life insurance policies to routine and comprehensive medical tests, insurance claims cover it all. A third party may be permitted to file claims on behalf of the insured individual in particular instances. However, in the vast majority of circumstances, only the policyholder(s) is/are eligible to receive payouts.


  • A policyholder’s formal request to an insurance company for coverage or compensation for a covered loss or policy event is known as an insurance claim.
  • The insurance company verifies the claim and, if it is granted, pays the insured or an authorised interested party on the insured’s behalf.
  • Filing a claim on your property and casualty insurance, such as your car or home, can result in rate increases on your future premiums.

How an Insurance Claim 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, loss of life, 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 almost surely rise. On the other hand, if you aren’t at fault, your rates may or may not increase.

For example, getting 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. 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 tend to 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.

Types of Insurance Claims

Health Insurance Claims

Costs for surgical procedures or inpatient hospital stays remain prohibitively expensive. Individual or group health policies indemnify patients against financial burdens that may otherwise cause crippling financial damage.

Health insurance claims filed with carriers by providers on behalf of policyholders require little effort from patients; the majority of medical claims are adjudicated electronically.

Policyholders must file paper claims when medical providers do not participate in electronic transmittals but charges result from rendered covered services. Ultimately, an insurance claim protects an individual from the prospect of large financial burdens resulting from an accident or illness.

Property and Casualty Claims

A house is typically one of the largest assets an individual will purchase in their lifetime. A claim filed for damage from covered perils is initially routed via the Internet to a representative of an insurer, commonly referred to as an agent or claims adjuster.

Unlike health insurance claims, the onus is on the policyholder to report damage to deeded property they own.

An adjuster, depending on the type of claim, inspects and assesses damage to property for payment to the insured. Upon verification of the damage, the adjuster initiates the process of compensating or reimbursing the insured.

Life Insurance Claims

Life insurance claims require the submission of a claim form, a death certificate, and, oftentimes, the original policy.

The process, especially for large face value policies, may require in-depth examination by the carrier to ensure that the death of the insured did not fall under a contract exclusion, such as suicide (usually excluded for the first few years after policy inception) or death resulting from a criminal act.

Generally, the process takes approximately 30 to 60 days without extenuating circumstances, affording beneficiaries the financial wherewithal to replace the income of the deceased or simply cover the burden of final expenses. Filing an insurance claim may raise future insurance premiums.

Special Considerations

There are no hard-and-fast rules around rate hikes. What one company forgives, another won’t forget. Because any claim at all may pose a risk to your rates, understanding your policy is the first step toward protecting your wallet.

If you know your first accident is forgiven or a previously filed claim won’t count against you after a certain number of years, the decision of whether or not to file a claim can be made with advance knowledge of the impact it will or won’t have on your rates.

Talking to your agent about the insurance company’s policies long before you need to file a claim is also important. Some agents are obligated to report you to the company if you even discuss a potential claim and choose not to file it.

For this reason, you also don’t want to wait until you need to file a claim to inquire about your insurer’s policy regarding consultation with your agent.

Regardless of your situation, minimizing the number of claims you file is the key to protecting your insurance rates from a substantial increase. A good rule to follow is to only file a claim in the event of a catastrophic loss.

If your car gets a dent on the bumper or a few shingles blow off of the roof on your house, you may be better off if you take care of the expense on your own.

If your car is totaled in an accident or the entire roof of your house caves in, filing a claim becomes a more economically feasible exercise. Just keep in mind that even though you have coverage and have paid your premiums on time for years, your insurance company can still decline to renew your coverage when your policy expires.

When not to file an insurance claim

Insurance companies keep a record of all filed claims, whether they’re paid out or not. Not all claims will result in an increase in your insurance costs, especially if they’re small, but multiple small claims within a short time period often raise rates.

Before you decide to file an insurance claim, review your policy to make sure that the damage or loss is covered. If you’re unsure, you may be able to get some insight by calling your insurance agent.

For small claims, consider whether the cost of repairing the damage or replacing items is significantly higher than your deductible. For instance, if your computer is stolen and would cost $1,200 to replace but your deductible is $1,000, it may not be worth adding a claim to your record to receive a $200 insurance payout.

What happens when an insurance claim is made against you?

When somebody makes a claim against your insurance, your insurance company will work to determine whether you were at fault in the incident.

If you were involved in a car accident, your insurance company will review police reports and witness statements to determine whether you were more than 50% responsible for the collision.

If your insurer determines that you were the at-fault driver, your insurance cost can increase up to 46% if you’re not enrolled in an accident forgiveness program.

If someone is injured in your home, it’s best for you to file a liability claim with your own insurance company so that you can tell your side of the story and potentially have the claim dropped.

Liability claims are often costly for insurance companies and usually result in a significant increase in rates — or even cancellation of your policy.

Disputing a claim

If you aren’t satisfied with your auto insurance claim settlement, feel that your claim was wrongly denied, or your car was not properly fixed after an accident, you can dispute the claim by contacting your state’s insurance department and submitting a complaint.

Car insurance is regulated at the state level, and most states have a division that deals specifically with policyholder issues.

You can also hire an attorney to represent you. However, the cost may outweigh any increase in your settlement.

To dispute a home insurance claim or settlement offer, you can start by asking the insurance company to review your claim. If you aren’t able to find a resolution with the insurance company, you can hire a public insurance adjuster to give you an independent estimate of the damage.

Their estimate will either confirm that your insurance company’s settlement offer is accurate or provide evidence that you can show your insurer to request an adjustment.

In the event that a public adjuster finds the insurance settlement to be lacking and your insurer refuses to meet your requests, you can file a complaint with your state’s insurance department and hire an attorney.

Frequently asked questions

Can you cancel an insurance claim?

Most insurance companies will allow you to cancel or withdraw a claim, as long as you are the person who filed it. The claim will remain on your record but will show a $0 payout, and it should not affect your insurance rates unless you’ve made multiple claims over a short time period.

How soon can you file a claim after getting insurance?

You can file an insurance claim as soon as your policy becomes active, but the loss has to take place while the policy is in effect.

For example, if you get in a car accident on the same day that your insurance policy becomes active, you can file a claim. However, if you were in an accident the day before you purchased your policy, you could not file.

What happens when insurance can’t get a hold of the person at fault?

When your insurance company isn’t able to contact the driver who caused an accident, it will try to contact the person’s insurance company directly.

If the insurance information is not available or the other insurance company is not cooperating, your insurer will generally cover the claim under your uninsured/underinsured motorist coverage. This type of claim will not raise your rates.

Can you file a claim with two insurance companies?

There is no law against having two insurance policies that cover a single vehicle or home. However, most policies have an “other insurance clause,” which states that each policy will only pay for a portion of the damage.

Insurance is meant to make you whole after a loss, and this clause ensures that you don’t benefit financially from an insurance transaction.

Can you get insurance after a claim?

You can still get insurance after filing a claim, but depending on the type and size of the claim you file, the cost of your insurance may go up. If you have had very large claims where you are at fault, your insurance company may choose not to renew your policy at the end of the policy period.

Depending on where you live, insurance companies are required to give you a 30-to-60-day notice when deciding not to renew your policy so that you have adequate time to find a new insurer.

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