How do auto insurance companies pay out claims?

How do auto insurance companies pay out claims? The process is usually straightforward. Depending on your coverage, your auto insurance company may send you a check to repair damages to your car or pay medical bills. However, there is some work you must do beforehand to ensure a successful claim.

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Rachel Bodine graduated from college with a BA in English. She has since worked as a Feature Writer in the insurance industry and gained a deep knowledge of state and countrywide insurance laws and rates. Her research and writing focus on helping readers understand their insurance coverage and how to find savings. Her expert advice on insurance has been featured on sites like PhotoEnforced, All...

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Written by Rachel Bodine
Insurance Feature Writer Rachel Bodine

Leslie Kasperowicz holds a BA in Social Sciences from the University of Winnipeg. She spent several years as a Farmers Insurance CSR, gaining a solid understanding of insurance products including home, life, auto, and commercial and working directly with insurance customers to understand their needs. She has since used that knowledge in her more than ten years as a writer, largely in the insurance...

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Reviewed by Leslie Kasperowicz
Farmers CSR for 4 Years Leslie Kasperowicz

UPDATED: Jun 6, 2022

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What You Should Know

  • Auto insurance companies often send checks to individuals for legitimate claims
  • You must document damages after an accident and file a police report, in some cases, to ensure a successful claim
  • Third parties can also file claims, but they must provide their own documentation

How do auto insurance companies pay out claims? For example, will your auto insurance company give you one large check to settle a claim? When can you file an auto insurance claim? And can you expect a payment from your auto insurance company when your car is totaled?

The reimbursement amount and the payment schedule for your compensation depend on a variety of factors, including the type of coverages you and the other driver have. So understanding your auto insurance becomes increasingly important.

Generally, you can make a claim with your auto insurance company for comprehensive and collision auto insurance coverage. You can also make claims if you have uninsured motorist coverage, underinsured motorist coverage, GAP coverage, and personal injury protection or medical payments insurance.

With that established, who receives payment? You will usually acquire compensation, but there are times when your auto insurance company will pay a third party directly.

Read on to learn about how auto insurance companies pay claims and what your part is during the auto claims process. And if you want to compare quotes from different auto insurance companies, enter your ZIP code into our free quote tool above to see rates from top companies in your area.

How do auto insurance companies typically pay out claims?

Some auto insurance companies prefer to pay for repairs directly to cut down on fraud. (The Federal Bureau of Investigation estimates that insurance fraud costs companies $40 billion a year.) However, in many cases, your auto insurance company will issue you a check.

The Parties Receiving Payment

In these situations, your auto insurance company will pay you directly:

  • Your policy allows you to utilize the auto repair shop of your choice.
  • You have suffered injuries in a crash and need compensation for medical expenses, lost wages, and whatever your PIP or MedPay covers.
  • The car you own is a total loss because its market value is lower than the cost of repairs.
  • You have GAP coverage and the car you are leasing is totaled, so you should know how your auto insurance company calculates a total loss.

Sometimes, your auto insurance company might write out a check to you and the company that financed your lease. Getting compensation is a multi-step process that involves contacting that financial institution and obtaining signatures.

Now, if your auto insurance company has a list of preferred auto body shops, the company will pay the shop directly.

Also, in most circumstances, third parties can make an auto liability insurance claim against your car insurance company and receive compensation. However, in no-fault states, you must first seek compensation from your insurance company before filing a third-party insurance claim.

The Size of Your Compensation

When you make a successful claim with your auto insurance company, the size of your claim and the schedule for any payment you receive depend on a few factors:

  • The type of damages you’ve suffered and the state where the collision occurred – You could file a claim if the other driver damaged your car or injured you in a collision. However, your state might set monetary thresholds.
  • Your deductible – If you have a higher deductible, that lowers the amount your auto insurance company will pay for damages or other types of compensation.
  • Your level of coverage – You can adjust the level of coverage you have at any time (but not immediately after an accident). However, note that this will raise your rates as well.
  • Your type of coverage – Again, you can only file a claim for coverages that you have and only when those coverages apply. For example, you can file a comprehensive auto insurance claim if that coverage is part of your policy and your car suffered damage from falling objects or other covered events.

With that understanding, read on to discover more about the auto insurance claim process.

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What is the insurance claim process like?

And how can you ensure a successful auto insurance claim? The insurance claim process begins after you or another party initiates it. This is generally what the process entails:

  • Obtain a police report (if necessary).
  • Document the damage.
  • Review your coverage.
  • Get an estimate of your repair costs.
  • File a claim with your or the other driver’s insurance company.
  • Communicate with an insurance adjuster.
  • Negotiate the payment,
  • Pay your deductible, if needed.
  • Repair any damages.

To have a successful claim, you need to be honest with the insurance company and remain diligent after an accident occurs. Read on for a breakdown of the process.

What to Do After an Accident

For auto insurance claims, there are a few things you need to do before filing if possible. If you get into an accident with another driver, this is what you should do:

  • Stay at the scene of the accident.
  • Call the police.
  • Find witnesses.
  • Take images of the damage.
  • Exchange insurance information with the other driver.

Why should you obtain a police report? If you were involved in a multi-car collision, a police report is a record of that incident. Even if the crash is minor, you may suffer injuries that you are unaware of initially.

Also, even if you do not suffer injuries, a police report will assist you during the auto claim process. Your insurance company will request a police report during its investigation.

When You Are Ready to File a Claim With Your Auto Insurance Company

Before filing a claim with your insurance company, review your coverage. If you have collision coverage, a successful claim will help you pay for damages to your vehicle. Once you have established that you have grounds for making a claim, gather your documents and contact your insurance company.

Whether you talk to an agent by phone, use an app, or start the process online, you will need to provide the following information:

  • Your name and phone number
  • Your auto insurance policy number
  • Details about the auto accident
  • Documentation

Your agent might ask for the police report, and you can provide that if it’s available. After filing your claim, your insurance company assigns an adjuster to your case who will inspect your car for damages.

When the adjuster ends their investigation and they determine that you have a legitimate claim, they will offer you a certain amount to help cover the damages.

If You Need to File a Third-Party Claim

Before filing a third-party claim, obtain multiple estimates for the repairs or damages.

To file a third-party claim, you may need to contact the other driver’s insurance company. Provide the same details you would if you were contacting your insurance company, with the exception of your policy number. (In this case, you will need to provide the other driver’s information.)

After filing your claim, you will need to cooperate with the other insurance company’s claims adjuster and negotiate the settlement if your claim is successful.

Auto Insurance Claim Payments: The Bottom Line

To reiterate, you are more likely to receive payment after a successful claim if you are a third-party claimant, you suffered injuries, or you can pay your auto shop directly. Additionally, if you are leasing your car and have GAP coverage, you can file a claim if the car is a total loss.

You need to contact an insurance company within days of the accident and have a police report in order to obtain a record of the accident. Also, be aware of your coverages and the overall process.

We hope that this information has helped you prepare for any future claim process. And now that you know how insurance companies pay out claims, are you ready to see rates from top auto insurance companies in your area? Simply enter your ZIP code into our free quote tool below to get started.

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