Navigating an Insurance Claim

By Diane M. Calabrese / Published June 2021

Call the claim agent. It’s that easy. Well, it should be that easy. Yet often it’s not. 

     Several issues can impede the movement of an insurance claim. Among them are those that rest with the claimant, such as procrastination and lack of documentation. 

     Actually, in one way or another, all the issues circle back to the insured party. A claimant should not have to be told a loss is not covered; he or she should have read the policy.

     To avoid ending up hopelessly adrift, know how to navigate an insurance claim. A short guide to reminders, arranged as an acrostic (N-A-V-I-G-A-T-E), follows.

N—Never wait to get started on filing a claim. Call your agent as soon as possible after an incident. 

     Those who live in hurricane-affected areas often receive automated calls from insurers prior to a storm. The insured are reminded to call their agent immediately following a storm if they sustain damage. Insurers want to be able to deploy claims agents to sites as quickly as possible, and plan logistics of deploying those agents.

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     Storm damage and fire damage require immediate attention. The mitigation of further damage is always a goal, and calls to agents get made. 

     Theft claims, however, may not be made so quickly. A distributor, for example, may try to find the individual who rented equipment and did not return it on time. Perhaps the renter had a family problem and
forgot about the machine; perhaps not. It’s difficult to sort through, and a distributor may be hesitant to file a police report.

     Don’t wait too long. And, do file the police report. Filing the police report is important for reasons beyond being compensated for the loss. It can be used as evidence of the loss when filing an income tax return and claiming a loss beyond what was reimbursed by insurer. Also, it en-ables police to identify trends in thefts in geographic areas.

     With vehicular accidents, there’s no question a claim will be filed immediately if police are on the scene. In effect, insurers will be notified by police of the incident.

A—Answer queries from the insurer. If an adjuster is sent to site to assess and document damage, be cordial (even if in a state of anxiety). The adjuster wants to obtain the best documentation possible and stream- line the processing of a claim.

     If the insurer asks for documentation regarding ownership—let’s say a distributor has just paid off a mortgage and the mortgage holder is still listed as holding a lien (lag time of bureaucracy), get the insurer the correct information. It can be vexing. Still, working cooperatively with agents and adjusters is the speediest path to recovering from a loss.

     Adjusters should be notified if damage is found belatedly or after they have made their assessment. Sometimes damage (e.g., electrical) is not obvious to the adjuster but becomes apparent when a contractor arrives on site. 

     Be ready for the adjuster by treating an incident according to the what-when-where-who sequence. The sequence varies according to the type of incident, but the principle is the same. To collate thoughts, write a short account (for self-reference) of what happened, when it happened, where it happened, and who (if anyone) was involved. 

V—Verify coverage. If the neighbor’s 100-year-oak tree crashes through the service-center roof, do not expect the neighbor to be responsible for the damage. In most states, the neighbor is not responsible. (It is possible to go to court and try to demonstrate the neighbor did not properly care for the tree and that the tree was a danger—a costly course. And the neighbor may out of goodness offer to pay for the damage.)

     The short of it is, be sure a policy covers trees falling through roofs, even though there is no tree on your property. The tree is just a simple example.

     Many businesses do not have flood insurance because they are not on a 1000-year (or less) cycling flood plain. But when storm sewers get clogged and new developments canalize fast-flowing water, flash floods can occur almost anywhere. 

     Similarly, earthquake insurance is often overlooked. Be careful to verify that storm-damage policies in certain states still cover hurricane damage. In many instances, businesses assume they have coverage they do not. 

I—Include documentation. If there is a natural disaster, and a business suffers only minor damage—a punctured roof, a few broken windows—the insurer may ask the claimant to provide documentation via photos. (It’s a way of sending adjusters to sites where damage is more significant.)

     The insurer will want to know the age of the roof as well as see the images of the damage. The same follows with windows or exteriors. If documentation of age and original cost of damaged structures is available, and the insurer wants it, provide it. 

     Unresponsiveness can slow down a claim, especially if the claim does not materially affect the functioning of a business. For example, if aluminum or vinyl siding has been pitted by hail, the business can continue to function. 

     Inflating the cost of the original roof, exterior, windows, or mechanical structures is simply a no-no. It’s fraud, and it hurts everyone. Insurance, after all, is built on the concept of cooperation in managing risk, a common fund that can be tapped to make whole those who suffer a loss. The hope is that most will not suffer a loss. 

     (The best thing about insurance? Having it and never—or rarely—having to use it.)

G—Get required estimates. Worries over premium increases cause some claimants to seek—or only send to the insurer—low estimates. For full restoration of the property, an owner ought to rely on contractors who will do repair work and do it in a timely way. 

     The insurer will expect reasonable estimates. Consider a damage claim. The insurer will continue to offer a policy to the claimant after the damage is repaired. The insurer wants the rehabilitation of the property to be done to standards and codes.

A—Analyze gaps. Property damage, theft, liability…we can all make a quick list of the types of insurance a business ought to have. Business interruption insurance is something owners have been purchasing for many years as well. 

     Suppose a business could not operate for a week because of a several-day-long power outage. Business interruption insurance would help. 

     Unfortunately, in 2020 some holders of business interruption insurance policies are being told of an exclusion they did not know they had for a cause of interruption that was not foreseen. Exclusions are being fought in court in many instances. 

T—Talk with a trusted agent. Low rates may be tempting when policy hunting. Low rates do not indicate service will be diminished.

     There is an advantage, though, to working with a firm that has local agents. Being able to sit down and talk with an agent on an annual basis can help with maximizing coverage and minimizing cost of insurance.

     Yes, the same talking can go on via video. Thus, whether an agent makes a physical or a virtual visit to a business, establish a relationship that allows for questions such as whether to purchase earthquake insurance makes sense.

E—Expand coverage as needed. Risk is defined in the aggregate. Most likely to happen is not equivalent to will happen. The U.S. Small Business Administration links to tools for assessing risks—kinds of accidents, natural disasters, lawsuits, etc. that could damage a business. (See https://www.sba.gov/business-guide/launch-your-business/get-business-insurance.)

     Small businesses that aspire to win government contracts at the state or federal level will find there are prescriptions for the types (and amounts) of coverage they need before they will be made eligible to seek a contract. A good agent will help an owner obtain the coverage. 

     Insurer responsibilities to policy holders are largely governed by states. And start with the state insurance commissioner’s office for advice on how to avoid and handle problems. Regulators set expectations of timely handling of claims, equitable settlement, causes (and reasons) for denials, and appeal of denials. 

     Knowing the most frequent types of claims made by businesses can assist owners when they assess their insurance needs. A few years ago, The Hartford released an analysis of claims data that put burglary and theft at the top (with 20 percent). Most surprising, customer slips and falls came in at 10 percent, the same frequency as fire claims.

     A trusted agent will be able to provide information about the frequency of claims affecting similar businesses in a geographic area. Use that information for guidance when deciding whether to expand coverage. 

     Also, look at the consolidated crime data supplied by police departments and most communities. When relocating a business or adding a new branch, it’s always best to check crime statistics for a potential geographic area first. Prudence in avoiding flood plains and earthquake faults also comes into play.

  Risk reduction is always the first goal in the realm of insurance, and an agent can give lots of advice on how to achieve it.