An Insurance claim is a bill or a formal request that a policyholder sends to an insurance company to demand coverage and future benefits for the insured person.
When a policyholder suffers a loss, they can file or appeal a claim with the insurance company to obtain payment for the coverage of their loss as per the insurance policy.
How to process a claim?
In its simplest form, claims processing is the process insurance companies use to examine claim submissions for sufficient documentation, validation, reasoning, and validity. The insurance provider may entirely or partially reimburse the insurer for the cost of the loss.
The insurance industry protects the assets of its policyholders by transferring the risks of their business, health issues, etc., to insurance companies. Insurance industries act as financial intermediaries.
It depends upon the insurance company to validate or deny the appeal of the policyholder.
How does an insurance claim work?
In case of any significant incident or emergency when a person is not in enough financial state, an Insurance claim can provide some relief in such unfortunate incidents. These incidents could be in the form of a medical emergency, Car accident, property loss, etc.
How to file a claim?
- When any incident occurs, the insurer should report it to the insurance provider.
- The insurance will provide the claim forms to fill out.
- Supporting documents should be attached to that form during submission.
- The provider then reviews the form and checks its validity.
- The insurance approves the claim if all the policies and regulations are met.
- After the approval, the insurance provides the benefits per the policy agreement to its beneficiary.
Types of Insurance Claims
Different insurance policies cover different types of insurance claims. The most frequently issued claims are:
1. Health or medical insurance
2. Life insurance
3. property or Casualty insurance
4. Vehicle insurance
5. Claims covering Natural disasters
6. Claims involving Third Party
Insurance for Health:
Health insurance includes the services provided by a healthcare system to a person. These insurance claims cover the expenses for consultations, medicines, surgeries, and hospital stays. These health claims can be of two types:
Cashless Insurance Claims:
The person seeking insurance can only get treatment from the hospitals mentioned in the policy. The policyholder must show the health card provided by the insurance company. The insurance company will take care of all the treatment expenses.
Reimbursement Insurance Claims:
The policyholder must pay for their treatment and then file for reimbursement after the treatment. For the sake of applying for a refund, they must provide the hospital bills and the bills for medications.
Insurance for Life:
This type of insurance provides compensation to the family or beneficiaries of the policyholder in the case of the sudden death of the insurance holder or provides them with an adequate amount of money after a set duration.
The Death Benefit is cash the insurer has to pay when the insured dies and is free of income tax. There are two types of life insurance:
Term life insurance covers the insured for a set duration of time. It is an inexpensive life insurance due to its simple procedure. The term life insurance usually lasts 15 to 20 years, which is sufficient for the insured’s family.
Permanent Life Insurance:
This type of life insurance is designed to extend over the whole life of the insured person. It is expensive, but it comes with additional benefits, such as cash value that increases with time. This amount can be cashed out or borrowed.
Both policies mentioned above need monthly or yearly payments termed “The Premium” to keep them effective.
Insurance for Property:
Property insurance includes policies that provide financial recovery for the damage to the property. The insured can be the owner, the property renter, or the person injured on a property who decides to sue. Property insurance covers a variety of damages to the property.
The insured can claim property insurance against the damage caused by natural disasters, such as hail or wind, lightning, snow, etc. It also protects against damage caused by fire, theft, and vandalism.
However, property insurance typically excludes the damage caused by floods, tsunamis, sewerage backups, earthquakes, and nuclear disasters like war.
The damaged property can be replaced or repaired, paid the essential cash value, or extended cash value if the cost for the property has increased.
Insurance for Vehicle:
Vehicle Insurance, or Car Insurance, covers the insurance that claims for the damage to cars, motorbikes, trucks, and other vehicles. It also covers the theft of the car. Following are some of the coverages car insurance provides:
Auto Liability Coverage:
In most states, purchasing liability coverage is a legal requirement. This coverage helps pay for any injury or property damage the policyholder causes.
Comprehensive auto insurance covers the damage to the vehicle caused by vandalism, theft, or fire. It includes the repair or replacement of the automobile. The insured has to claim the reimbursement from the insurer after the coverage.
It covers the insurance after an accident of the car. It helps pay to either repair or replace the damaged car according to its cash value.
Medical Payment Coverage:
Medical payment coverage helps pay the medical bills in case of injuries resulting from a vehicle accident. It covers hospital visits, medications, and surgeries.
In some states, medical payment coverage also provides compensation for the loss due to the injury, such as lost income. It comes under the domain of Personal Injury Protection.
Claims Covering Natural Disasters:
This type of insurance covers the damage done by catastrophic occurrences, which include injuries caused by floods, hurricanes, earthquakes, lightning strikes, wildfires, tornados, hail, and winds. Different policies cover different catastrophic events and only cover some of them.
Catastrophic insurance is more complicated than other forms of insurance because of the unpredictability of the events. It is challenging to predict and estimate the total damage done by a natural disaster.
Also, catastrophic events can cause excessive damage, making it too difficult for insurance companies to manage.
Claims involving Third Party:
Claims involving the Third-party are liability claims. A third party is an individual, neither insurer nor a policyholder, but a person injured or wronged by the insured. For example, if the insured causes an injury to an individual in a vehicle accident or damages their property or belongings, he is liable for the loss and must compensate.
These insurance claims cover the hospital and treatment expenses, wage loss, and property damage. The sufferer can reach out for compensation to the courts if refused by the insurer or insured to do so.
Why is Insurance Important?
Insurance plans cover a lot of elements when it comes to securing the future. They can:
1. Help pay for sudden medical emergencies and treatment for a broad set of medical conditions.
2. Secure the future of beneficiaries, especially the insured’s children, after the holder’s death.
3. Protect and compensate for the loss of property, house, or vehicle after any unfortunate event or damage, including catastrophic events.
4. Provide investments for future wealth or savings if the premium is paid regularly.