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.