How do car insurance companies pay out claims?

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Here's what you need to know...
  • If you have an auto insurance claim from a car accident, you will work directly with the auto insurance company to resolve your claim
  • Every auto insurance company has a different way of handling claims procedures. Your auto insurance policy is a good resource for the information that your auto insurance company may require in order to settle your claim
  • If you are going to receive a check for the settlement of your auto insurance claim, the auto insurance company may give it to you directly or it could go straight to the repair shop

The process of filing a claim under your auto insurance policy after an accident does not have to be complicated. You just need to make sure that you have all of the necessary information that the auto insurance company requires. Every company has a unique way of dealing with the claims process and settlement.

The manner in which you get paid for the claim depends on your auto insurance company’s specific procedures as well as the type of damage from the auto accident.

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Filing a Claim Under Your Auto Insurance Policy

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If you are working with your auto insurance company directly to file a claim, the process may be less intimidating and complicated than if you have to go through the other driver’s auto insurance policy. The reason that you would file a claim through the other driver’s auto insurance policy is if the other driver was at fault for the auto accident.

When you file a claim, it is important to have the required information ready so that the insurance company can make a determination about whether you have coverage for the claim and the details of the claim. It is a good idea to try to contact your auto insurance as soon as possible after the accident. They can also tell you what information is required to process your claim.

In general, you will want to get the other driver’s personal contact information, details on all of the vehicles involved in the accident, the exact location of the accident, information on any witnesses to the accident and a copy of the police report if applicable.

After Your Claim is Filed

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The next step after you have filed a claim under your auto insurance policy is that a claims adjuster from the auto insurance company will be assigned to your case. The claims adjuster will determine the amount of damage from the accident and what is a reasonable estimate for the cost of repairing the damage to your vehicle.

If the damage to your vehicle is over a certain percentage of the total value of your vehicle, the auto insurance company may find that the vehicle is a total loss.

At this point, you would receive a check from the auto insurance for the total value of the car based on its estimate. To determine the value of a car, the auto insurance typically either uses the National Association of Automobile Dealers calculation or the estimate from the Kelley Blue Book.

If it is determined that you will be receiving a check for the amount of the repairs needed to your vehicle, then you do not necessarily have to take your car to any particular repair shop. The auto insurance company cannot require that you use a specific repair shop, but it will make sure that the cost of your repairs is actually reasonable before writing you a check.

Receiving a Check for the Settlement of Your Auto Insurance Claim

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Once you and the auto insurance have agreed on an amount to settle your auto insurance claim, you will receive a check for the cost of the repairs. This does not necessarily mean that you will get the check in hand to use however you want.

Sometimes, the auto insurance company will insist on making the check out to the auto body repair shop directly rather than giving it directly to you. The reason that the auto insurance company may have a policy of handling settlement checks this way is that they can verify that you actually used the settlement check to have the car repaired.

Another way that some auto insurance companies handle the payment of a settlement check is to require you to have the car repairs performed by a licensed mechanic and will then have you submit the bill for reimbursement. This is another way that the auto insurance company can guarantee that you actually had the repair work performed on your car. This is also a way to help prevent insurance fraud and discourage drivers from filing fraudulent claims after an alleged auto accident.

If you have leased or financed a car, keep in mind that there may be certain terms in your lease agreement or loan agreement that require you to use the proceeds from the auto insurance to actually have the car repaired. This is because you do not actually own the car outright just yet, so the dealer or the lender wants to make sure that they protect the value of their asset.

The Reputation of Car Insurance Companies in Paying Out Claims

If you are involved in an unfortunate car accident, you will quickly find out that simply getting the lowest rate for auto insurance is not necessarily the only thing that matters. Before you take out an auto insurance policy, you need to do some digging into the reputation of the auto insurance company to make sure there will not be any surprises in how your claim is handled.

One source of information is your state department of insurance. You can find out whether the auto insurance company is licensed to practice in your state and if there are any complaints against it for bad faith settlement negotiations. This is helpful information to have before you switch auto insurance companies and when you are shopping around for better rates on auto insurance.

Recap

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If you are involved in an auto accident, you should contact your auto insurance company as soon as possible with the details of your claim. Keep in mind that every auto insurance company has a different way of handling the claims process as well as procedures for how the settlement of a claim is delivered to the policyholder. Make sure that you follow all of the requirements listed in your auto insurance policy to be able to recover for your claim.

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