Understanding Valid Auto Insurance Claims: Your Guide

Understanding what constitutes a valid auto insurance claim is essential for vehicle owners to ensure they receive proper coverage in the event of an accident or damage. A valid auto insurance claim is typically one that falls within the scope of the policyholder's coverage and is filed within the specified timeframe. It is important to note that insurance companies are for-profit entities, and their primary goal is to minimise payouts. As a result, they may deny claims based on various factors, such as policy exclusions, lapsed coverage, failure to notify, or fraud. When filing a claim, it is crucial to provide detailed information, including police reports, witness statements, and medical records, to support the validity of the claim.

Third-party claims

A third-party insurance claim is a claim filed by someone other than the policyholder or insurance company. If you've been in a car accident that was caused by another driver, you can file a third-party claim with the other driver's insurance company to cover your accident-related expenses, such as vehicle repairs, medical bills, a rental car, and lost wages.

To file a third-party claim, you'll need to know the at-fault driver's name, phone number, license and registration information, vehicle information, and auto insurance information. It's also a good idea to gather photos of the accident scene and vehicle damage, as well as the contact information of any witnesses.

You can then file a claim directly with the at-fault driver's insurance company, or your own insurance company may be able to navigate the claims process on your behalf. The other driver's insurance company will likely have an online claim portal or mobile app that you can use to initiate the claim process. You'll need to provide some basic information about yourself and the accident, including the date of the accident and the other driver's details.

After you file the claim, the at-fault party's insurer will typically assign an adjuster to investigate the accident, determine fault, and provide an initial estimate of the repair costs. If the adjuster determines that the other driver was at fault, they will cover the costs of repairs and injuries up to the policy limits.

It's important to note that filing a third-party claim can be more challenging because the other driver's insurance company is on their side, and they must agree that their driver was at fault. Additionally, the other driver may not have sufficient insurance coverage or may not cooperate with their insurance company, which could affect your ability to receive compensation.

In some states, known as no-fault states, you can only make a third-party claim for property damage and not for your injuries. In these states, you would typically file injury claims with your own insurance company first, using your personal injury protection (PIP) or medical payments (MedPay) coverage.

Liability coverage

It's important to understand the limits associated with liability coverage. There are typically separate limits for bodily injury liability per person, bodily injury liability per accident, and property damage liability per accident. For example, a policy might have a $25,000 limit for bodily injury liability per person, a $50,000 limit for bodily injury liability per accident, and a $20,000 limit for property damage liability per accident. These limits dictate the maximum amount the insurance company will pay out for injuries or property damage resulting from a single accident. If the costs exceed these limits, the at-fault driver becomes responsible for the remaining expenses.

When determining the appropriate amount of liability coverage, it's recommended to select a limit that matches or surpasses your total net worth. This ensures that your assets are adequately protected in the event of a costly accident. While basic liability coverage is mandated by law in most states, purchasing additional coverage beyond the minimum requirements is often a prudent decision, especially considering the potential expense of medical bills and property damage.

In summary, liability coverage is an essential safeguard for drivers, providing financial protection in the event of causing injury or property damage to others in a car accident. By understanding the components and limits of liability coverage, drivers can make informed decisions about their insurance choices and ensure they have adequate protection in place.

Collision coverage

Unlike some coverages, you don't select a limit for collision. The maximum it will pay out is based on the actual cash value of your vehicle, minus your deductible. Collision coverage only provides coverage for damages to your vehicle and does not cover damage to another person's vehicle or property. It also doesn't cover all damage to your vehicle, and may not cover older vehicles. For example, it won't pay for damage caused by non-traffic events like extreme weather, theft, or hitting an animal.

When making a claim, you will first need to pay your selected deductible, and then the insurance company will pay the remaining cost of the repairs. For example, if you have a $250 collision deductible and the damage to your vehicle is $1,000, you will pay the first $250 directly to the repair shop, and your insurance will cover the remaining $750.

If your vehicle is financed or leased, your lienholder may require you to have collision coverage to protect their interest in the vehicle. Collision coverage is typically required until the finance contract ends. Even if your vehicle is paid off, you may still want to consider collision coverage if you would have difficulty paying for repairs or replacing your vehicle in the event of a collision.

Comprehensive coverage

• Natural disasters: floods, hurricanes, earthquakes, tornadoes, and volcanic eruptions.
• Contact with animals: deer, moose, or other animals that may cause damage to your vehicle.
• Theft: comprehensive coverage includes both total and partial theft of your vehicle or the theft of certain parts.
• Fallen objects: damage caused by falling trees, branches, ice, or other projectiles.
• Vandalism: spray painting, break-ins, or any other form of vandalism.
• Fire and explosions.
• Glass and windshield damage.

It is important to note that comprehensive coverage does not include damage caused by a collision with another vehicle or object. It also does not cover damage due to potholes or anything personal stolen from your car.

Claim denials

There are several reasons why an auto insurance claim may be denied. Here are some of the most common reasons for claim denials:

Lapsed Insurance Policy

If you fail to pay your insurance premium on time, your policy will lapse, meaning you don't have an active policy to file a claim against. It is important to pay your premiums on time to ensure continuous coverage.

Insufficient Coverage

If the damages to a vehicle exceed the policy limits of the responsible party, the claim may be denied. For example, if you have $25,000 in property damage liability coverage but you total a car worth $40,000, the insurance company may deny the claim for the remaining amount.

Excluded Driver

If the at-fault driver is not named as an insured driver under the policy, they will not be covered. Only named insured drivers are covered under the policy.

Fraudulent or Exaggerated Claim

Filing a fraudulent or exaggerated insurance claim is grounds for rejection. Insurance companies routinely look for red flags, such as delays in reporting the accident or seeking medical attention, which may indicate that the claim is not valid.

Breaking the Law

If you were in violation of state law when the accident occurred, your claim may be denied. This includes driving without a valid license, driving under the influence of drugs or alcohol, or any other illegal activity.

Policy Exclusions

Insurance policies may have specific exclusions, such as "acts of God" or natural events. If an insurer believes that the accident was caused by an excluded event rather than the negligence of the driver, they may deny the claim.

Failure to Notify Insurer

Policies typically have time limits on how soon an accident must be reported to be covered. If you fail to notify the insurer within the specified time frame, your claim may be denied.

If your auto insurance claim is denied, you have the right to appeal the decision. You can gather evidence, such as police reports, eyewitness statements, and medical reports, to support your claim. You can also consider hiring an attorney to help you draft a demand letter and negotiate with the insurance company. Understanding the reasons for the claim denial is crucial to determining your next steps and ensuring a fair outcome.

Frequently asked questions