When you buy car insurance you don’t think about what will happen if you have a claim.
In fact, you may just be buying it because the law says you have to buy it. But when you do have a claim it sure is nice to have a check waiting for you from the car insurance company.
The simple fact is that car insurers charge premiums for car insurance policies so that if you ever do have a claim, they will have the money to pay for that claim. The insurance premiums you pay help build up what’s called a reserve. The insurance company uses this reserve for claim payouts.
Your Car Insurance Policy
- Your car insurance policy is a contract.
- The insurance policy is a contract between you, the policyholder, and the car insurance company.
- This contract defines the rules of play, so to speak.
- The insurance contract spells out who is responsible for what.
- The policy spells out the maximum amounts to be paid out for a claim and the amount you as a policyholder will pay on a claim.
- The amount of any claim that you are responsible for is your deductible amount, if you have a deductible.
- The policy premiums are also stated in your insurance policy/insurance contract.
Your Car Insurance Claim
- Claims cost the insurance company money.
- When you have a claim, think of your car insurance policy as a checkbook.
- The maximum payout for the claim is the limits spelled out within the insurance policy.
- To make sure they stay in business and stay around to pay for your future claims, insurance companies have to be careful on claim payments; which is why limits are set.
- The insurance company is responsible up to the policy limits; if the claim costs exceed the policy limits, you are responsible for the amount of excess.
- At the time of a claim the insurance company agrees to pay auto-body shops, doctors, hospitals and attorney’s on your behalf.
- A claim payout is not intended to be financial windfall for the policyholder.
- A claim payment is intended to put the policyholder back in the same position they were before the claim occurred. This gets confusing. Many policyholders don’t understand that a claim payment is to just put them back into the same position as before. Sometimes policyholders think a claim payment is a wind fall…it’s not.
- Auto-body shops, doctors, hospitals and attorneys are used in a claim to put you, the policyholder, back in the same position.