Events that trigger an insurance claim are almost always stressful. Filing a claim can be stressful, too. Understanding some concepts and terms you’ll encounter during the claims process can help offset that stress.
Your agent is always there to help you, but sometimes it’s nice to have the information beforehand. Keep this as a reference.
| Insurance concept or term | What it means |
| Independent insurance agent | An independent insurance agent is licensed to sell policies from multiple insurance companies, not just one. They offer a broader range of coverage options and price points. They represent the client’s interests and have no affiliation with a specific insurance provider. They work for an independent insurance agency. |
| Independent insurance agency | An independent insurance agency employs independent insurance agents. Independent agencies sell insurance for multiple insurance companies. They can present you with options from several insurance companies. |
| Captive agent or “captive” | A captive agent is a licensed insurance agent who can only sell policies underwritten by their insurance company. They cannot present clients with options from other insurance companies. A captive agent is an employee of the insurance company. |
| Insurance company or “carrier” | A carrier is a business entity that provides various insurance policies to individuals or businesses in return for premium payments. They absorb your financial risk by covering your losses after an incident. |
| Underwriting and underwriters | Underwriting is a process the insurance carrier uses to determine the risk they’re taking to insure you. They evaluate data like your driving or medical history to establish whether you’re a good or bad risk. They charge you based on that risk and give you a “risk rating”. The underwriter is the individual or group in charge of determining your risk rating, whether to insure you and how much to charge. After a claim, your risk rating may increase. |
| Claims representative | When you file a claim, you will be assigned a claims representative or “claims rep.” They’re an employee of the insurance company. They examine your claim to determine the company’s liability, coordinate investigations and claims adjusters, negotiate settlements and authorize payments. Their primary role is to facilitate your claim. They are not associated with your independent insurance agent or agency. They represent the insurance company’s interests. |
| Claims adjuster | A claims adjuster is a professional who investigates insurance claims on behalf of the insurance company. They determine the insurance company’s liability to pay you and how much. They evaluate if your claim is legitimate, assess the damage and determine a settlement amount. Adjusters may work directly for the insurance company or as independent contractors. |
| Independent insurance adjuster or “public adjuster” | An independent insurance adjuster is a professional claims handler who advocates for you in appraising and negotiating your claim. You hire them, not the insurance company. They are different from the claims adjusters the insurance company sends. Public adjusters work for your interests, assessing damage, preparing independent estimates and reading your policy to determine the extent of your coverage. Public adjusters negotiate with the insurance company’s claims adjuster. They can be helpful if you have a complicated claim or you feel the insurance company isn’t adequately compensating your loss. |
| Premium payments | A premium is the money you pay to keep your insurance policy active, usually a monthly or yearly payment. You should continue to pay your premiums even if you have a claim pending. |
| Deductible | A deductible is the amount you must pay before your insurance company pays. For example, say you have an auto claim for $4,000 and your deductible is $500. You’d pay $500 and the insurance company would pay $3,500. |
| Document submission | When you file a claim, you’ll need proof of the incident and any losses you’ve suffered. Documents can include pictures, police reports, witness statements and other relevant information. The insurance company will ask you to submit this documentation to support your claim. |
| Claim processing time | This is the time it takes to approve or deny your claim. Depending on the complexity, a claim can take several days to weeks to process. You’ll get regular updates from the insurance company. Call your insurance agent or claims representative if you have questions. |
| Claim status and progress | The claim status is the stage your claim is in. The progress shows how far the claim has come in the timeline of a claim. You might have a self-service portal or account to check for these updates. You might get texts or emails to indicate progress on your claim. Or you can contact your claims representative. |
| Claim rejection or denial | A claim is rejected if the insurance company determines it does not qualify as a covered peril based on your insurance policy terms. The insurance company must provide a written explanation and the section number in your policy used to deny your claim. |
| Claim appeal | You can file a claim appeal if you disagree with the claim denial. You have a limited time to appeal a claim, usually 14 days from the date you receive your written notice of claim denial. You can consult a lawyer or public adjuster to assist you with the claim appeal. |
| Claim approval | A claim is approved if it qualifies as a covered peril. You will receive an offer of compensation for your loss. If you disagree with the offer, you can contest it. If you sign an offer of compensation, you cannot appeal it. |
| Claim cancellation | Once you’ve filed a claim, you cannot cancel it. The claim will remain on your insurance record. If you’re unsure whether to make a claim, talk to your independent insurance agent first. |
| Loss | A loss is the damage suffered due to an incident. A loss can include damage to a person’s or business’s property or belongings. It can also be a physical, emotional or reputational injury. |
| 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. |
| Exclusion | An exclusion is an event, item, circumstance or incident your insurance policy doesn’t cover. For example, home insurance policies exclude damage from flooding. |
| Endorsement | 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. |
| Peril | A peril is an event or circumstance that causes loss or damage. Examples of perils are fires, vandalism, defamation, car accidents and dog bites. Your insurance policy specifies which perils are covered and which are not. |
| Additional living expenses (ALE) | If your home is uninhabitable due to a covered claim, your policy may cover temporary housing and living expenses, like hotels and restaurants. Policies differ, so talk to your agent about whether you need to add ALE as an endorsement. |
| Replacement value (RV) | Replacement value covers the cost of replacing a lost or damaged item with a new item of a similar kind and quality. For example, let’s say you purchased a television five years ago for $1000. Your TV is stolen. A similar TV would cost around $1500 today. You will get $1500 to buy a new TV. |
| Actual cash value (ACV) | Actual cash value looks at how much your item is worth at the time of loss or damage, taking depreciation into account. Going back to the television example, you paid $1000 for your TV five years ago, and a similar TV would cost around $1500 today. If the guideline is that a TV has what’s known as a “useful life” of 10 years, your stolen 5-year-old TV had 50% of its useful life left.
Obviously, this is less than the replacement value and not enough to pay for a comparable new TV. |
Call your agent for help
This isn’t an exhaustive list of insurance concepts and terms, but it gives you a good start. Your agent will help you sort the claims process and determine if filing a claim is in your best interest.