How do insurance claims work?

how do claims work

You buy renters insurance to manage financial risk. It’s not an investment—you don’t want to “cash in.”

But if something bad happens—a burglary or visitor injury at home, a theft away from home, a fire or water damage—you’ll want to file a claim and get your reimbursement check quickly.

How much of the cost will your insurance cover? That depends.

Does your policy reimburse for actual cash value or replacement cost value? The actual cash value of your 6-year-old stolen road bike might be $300, even though it was $800 when you bought it. Hello, depreciation! Meanwhile, the replacement cost value—the money you need to buy a new, comparable bike—might be $900. (At Jetty, we always sell policies on a replacement cost basis, since we think that folks in the real world don’t take depreciation into account in these situations and will feel better being “fully” reimbursed).

It also depends on the deductible you chose when you bought your renters insurance. A renters insurance policy reimburses you for some or most of the cost to replace your items or pay medical bills. However, it does not pay 100% of the cost. You make up the difference by paying a deductible.

If you choose a higher deductible, such as $1,000 instead of $500, you will pay slightly less each year for your policy. But you will need to pay $1,000 toward the total cost of replacing your covered items.

How to file a claim

First—prevent further loss

Insurance companies expect policyholders to do everything in their power to reduce and prevent loss. If you wait, you might suffer more losses—and receive lower reimbursement from your insurer.

Call the police to file a report for theft or burglary.

Then call your landlord. Ask them to fix any broken doors, windows or locks immediately.

Water pipe break? Move wet items out to prevent mold. For the same reason, move out dry mold-loving items, such as clothing or furniture.

Did someone steal your laptop, camera, jewelry or guitar? Buy padlocks for the gym locker. Take laptops and other “smash and grab” items out of your car.

Gather your papers

Find your renters policy and/or policy number.

Document the 5Ws for the incident: The who, what, when, where, why and how much.

If possible, find receipts for items that were stolen, lost or damaged.

Call your insurance company ASAP

Report the loss. They will walk you through the process over the phone. Ask questions.

If you don’t understand something, ask them to explain it in plain English. Remember: While renters insurance helps to protect your property, it ultimately is meant to protect your peace of mind.

Don’t delay! Contact your insurance company within 24 hours of the event.

Who decides how much a claim is worth?

An insurance expert called a “claims adjuster” will research your loss and calculate the payment you will receive. This calculation includes determining the actual vs. the replacement cost value of the items that were lost, stolen or damaged.

Some work as field adjusters, traveling to the scene of a fire, tornado, flood or to a car repair shop to see the damage first-hand. Others are desk adjusters. They interview you and others by phone to determine the cause and extent of the loss. This can include talking with police, home contractors, mechanics and—if they are researching dog bites, falls or other injuries for which you are liable—interviewing the victim and their doctors.

Does filing a claim mean higher premium rates?

Probably not. However, if you file a lot of claims in a short amount of time, your insurance company may consider you high-risk and raise your rates when you renew your policy.

When in doubt, ask.