How do insurance claims work?

Asking "How do insurance claims work?" makes auto insurance quotes easier to understand, and help you navigate the claims filing process. Filing a claim lets you get financial assistance if you were ever to experience a loss. But drivers should also be able to answer this question: How do insurance claims work with auto insurance rates?

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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

  • Filing a claim is how drivers are compensating for a loss
  • Taking notes and pictures of your loss can help your claim be processed faster
  • Typically, you will need to pay your deductible if your claim is approved

You’re out on the open road with the wind in your hair when all of a sudden you feel a bump from behind. Another driver has rear-ended you, but you don’t need to panic because you have an active insurance policy.

Your auto insurance is there to protect you should you ever need it. Notifying insurance companies when you need financial assistance to repair or replace your vehicle is called filing a claim, but when it comes down to it, most drivers don’t know how to navigate the insurance claim process.

If you don’t have very affordable auto insurance, asking, “How do insurance claims work?” is a very smart move on your part as filing a claim can actually raise your rates.

Asking “How do insurance claims work?” makes auto insurance quotes easier to understand too, as other insurance companies can see your claims history and decide if you are a high-risk driver or not based on it.

Enter your ZIP code to get free insurance quotes if you’ve ever wondered, “How do insurance claims work with insurance quotes?”

If you were to ask an auto insurance company, “How do insurance claims work?” you would most likely receive this answer: When you request compensation for a loss from your insurance company, the company will review your request. After investigating it, the company will either pay out your claim or deny it.

That’s a very succinct summary of the claim process. Let’s take a more detailed look at the steps of filing a claim.

Reach Out to Your Insurance Company

When you’ve suffered a loss, whether it be the result of a tree branch falling on your car or a vehicle break-in, you should reach out to your insurance company. Sometimes you’ll need to reach out right away or your claim won’t be covered, but the time you have to alert your insurance company can vary from state to state. If you’re not sure what the rules are where you live, take a look at this chart here:

Statute of Limitations for Car Insurance Claims by State
StatePersonal Injury Claims Statute of LimitationsProperty Damage Claims Statute of Limitations
Alabama2 years2 years
Alaska2 years6 years
Arizona2 years2 years
Arkansas3 years3 years
California2 years3 years
Colorado3 years3 years
Connecticut2 years3 years
Delaware2 years2 years
Florida4 years4 years
Georgia2 years4 years
Hawaii2 years2 years
Idaho2 years3 years
Illinois2-3 years5 years
Indiana2 years2 years
Iowa2 years5 years
Kansas1 year2 years
Kentucky1 year2 years
Louisiana1 year1 year
Maine6 years6 years
Maryland3 years3 years
Massachusetts3 years3 years
Michigan3 years3 years
Minnesota2 years6 years
Mississippi3 years3 years
Missouri5 years5 years
Montana3 years2 years
Nebraska4 years4 years
Nevada2 years3 years
New Hampshire3 years3 years
New Jersey2 years6 years
New Mexico3 years4 years
New York3 years3 years
North Carolina3 years3 years
North Dakota6 years6 years
Ohio2 years2 years
Oklahoma2 years2 years
Oregon2 years6 years
Pennsylvania2 years2 years
Rhode Island3 years10 years
South Carolina3 years3 years
South Dakota3 years6 years
Tennessee1 year3 years
Texas2 years2 years
Utah4 years3 years
Vermont3 years3 years
Virginia2 years5 years
Washington3 years3 years
Washington D.C.3 years3 years
West Virginia2 years2 years
Wisconsin3 years3 years
Wyoming4 years4 years
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Alerting your insurance company of a loss is the first step when filing a claim.

You’ll need to be able to accurately describe what happened to your insurance company, and you may be given the phone number and name of the claims adjuster who will be working with you throughout this process so make sure you have a pen and paper nearby when you make you initial call.

Once you’ve described the nature of your loss to the insurance company, that’s when the real legwork begins.

Organize All of Necessary Paperwork

Officially filing a claim with your insurance company may require you to fill out some forms or even give a statement regarding your loss. While it may seem aggravating, this is a vital step as it helps your insurance company double-check facts and verify that your policy covers the loss you suffered.

If you were able to take pictures at the time the loss occurred, your insurance company will most likely ask you to send those in. Essentially, when you experience a loss, be sure to take detailed notes and photos so you have plenty of evidence to provide to your insurance company.

Appraise the Damages

At this juncture, your insurance company will call in an adjuster. The adjuster may not only assess the damages but  could also interview any relevant witnesses. So if you were in an accident, be sure to ask anyone present for their contact information so you can share it with the adjuster.

Now, if your vehicle is in a mechanic’s shop, the insurance company may refrain from sending out an adjuster. The company may simply reach out to the mechanic to inquire about the extent of the damages to your car.

Pay Your Deductible

After the insurance company has decided to pay your claim, you’ll need to pay your deductible — if you have one that is. Some insurance companies offer their drivers a $0 deductible, and while the prospect of paying nothing to file a claim can be tempting, you must remember that your rates and your deductibles have an inverse relationship.

The lower your deductible, the higher your rates. Because of this, most drivers have their collision and comprehensive deductible set at $500.

Now, if your vehicle is considered to be totaled, your insurance company will typically subtract your deductible from the total payout you receive. You can expect to receive your payout in the form of a check. If you want to find some of the best auto insurance companies that file claims quickly you can read free company reviews online.

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Is it always worth filing a claim?

When it comes to auto insurance rates, how do insurance claims work against them?

Well, if your car has been damaged, you should get an estimate from a mechanic before you decide to file a claim because when you file a claim you run the risk of negatively affecting your rates. Below you can see a helpful chart that can help you decide if it is worth filing a claim or not.

Affect of Damage Claims on Auto Insurance Rates
Cause of DamageCoverage RequiredChargeable?Considerations
VandalismComprehensiveNoIf the cost to repair the damage is less than or not much over your deductible, skip insurance and pay for the repair yourself.
A Cart in a Parking LotComprehensiveNo (if vehicle was parked)Insurance company may request video to determine fault.
Fallen Tree or BranchesComprehensiveNoIf you know a big storm is coming, be careful about where you park.
Highway DebrisComprehensiveNoTry to get a license plate number if debris flew off another vehicle.
Car AccidentCollisionYes; you are at fault if you caused the accident. Your rates will increase.Consider the cost of the damage and your deductible and increased rates. If you will pay more in the long run by filing a claim for minor damage, paying out of pocket may be the better option. If you are less than 50 percent responsible, your insurer cannot penalize you.
Accident Caused by an Uninsured DriverUninsured Motorist CoverageNoIf you do not have uninsured motorist coverage, your collision coverage can pay for the damages, but you will have to meet your deductible first.
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Another good thing to consider your car’s total damage comparison to your deductible. If your deductible is set at $500 and the total cost to repair your vehicle is only $300, you shouldn’t bother filing a claim. Remembering these helpful tips will help you learn how to avoid an increase in your auto insurance rates.

Filing a Claim: What You Need to Know

Filing a claim can feel daunting but it doesn’t have to be.

Before you buy auto insurance, “How do insurance claims work?” should be a question you know the answer to, and now that you have the information you need to navigate the claims process, you can shop with confidence.

Filing a claim is how you can get the compensation you need to repair or replace your vehicle. If you’ve been in an accident, take copious photos and notes so you can offer detailed evidence to your insurance company and have your claim processed speedily.

If you want to know, “How do insurance claims work with insurance rates?” enter your ZIP code to get free quotes from insurance companies near you.

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