Claim

There are many types of small business insurance claims. Broadly speaking, they fall into the following areas:

• Property damage: Damage to business property from events like fire, theft, or vandalism.
• Liability: When someone outside your business alleges you caused an injury or property damage.
• Business interruption: Lost income when a covered event forces your business to close temporarily.
• Professional liability / E&O: Claims alleging mistakes, negligence, or failure to deliver professional services.
• Workers' compensation: Employee injuries or illnesses that occur on the job.

Claims occur in all forms of insurance since that’s how insurers pay insureds for covered losses.

Preparing in advance can make the claims process faster and prevent coverage surprises. Key steps include:

1. Understand your policy: Know what incidents your policy covers, the dollar limits, and any exclusions. This helps you avoid delays or misunderstandings during the claims process.
2. Know how your policy is triggered: Some policies pay based on when the incident happened (occurrence-based), while others pay based on when the claim is reported (claims-made). If you have a claims-made policy, such as professional liability or cyber liability, reporting deadlines matter.
3. Learn how your claims history affects your rates: Insurers keep a “loss run” report that details your past claims. Loss runs can influence future premiums and your ability to switch carriers. It’s smart to request and review your loss runs each year.
4. Be aware of deductibles and self-insured retentions (SIR): A deductible is the amount you pay before insurance covers the rest. Some liability policies use self-insured retention (SIR) instead, which requires you to pay certain defense or settlement costs upfront before the insurer steps in.
5. Understand special reporting rules (tail coverage / nose coverage): If you switch carriers or cancel a claims-made policy, you may need extended reporting period (tail) coverage to avoid gaps. If you join a new carrier, prior acts (nose) coverage may bring your previous work under the new policy.
6. Document incidents immediately: Take photos, gather witness statements, store receipts, and keep a record of events. Accurate documentation helps your insurer make a faster decision.

Follow your insurer’s claim procedures, which you can find in your policy. Typically, the first step is to inform the insurer of your loss over the phone or via the insurer’s website. Many insurers have deadlines, especially for claims-made policies, and delays can jeopardize coverage.

Additional steps to file a claim generally include:

• Sharing details about what happened, such has the date and time of the incident, what caused the loss, who was involved or affected, photos and videos, any injuries, and damage estimates.
• Providing supporting documentation, which may include police reports, medical records, invoices, repair estimates, or incident reports.
• Cooperating with the insurer's requests, including offering additional documentation, interviews, or proof of loss.
• Understanding your payment responsibilities in case you need to pay your deductible or SIR if your policy includes one.

Depending on the nature of the incident, you may need to take additional steps, such as submitting a police report (for commercial auto insurance claims) or doctor’s statements (for workers’ compensation insurance claims).

Once your claim is submitted, the insurer begins the review process:

1. Assignment to a claims adjuster: The adjuster investigates what happened, reviews documents, verifies coverage, and determines how much the insurer should pay.
2. The insurer may pursue subrogation: If another party is responsible for your loss, your insurer may recover costs from them after paying your claim. If you've signed a contract with a waiver of subrogation, your insurer may be limited in this recovery process.
3. Defense and legal costs (for liability claims): For lawsuits or legal disputes, insurance often covers attorney fees, legal costs, and settlements. Depending on your policy, legal defense may count toward your policy limit, or be paid “outside the limits,” preserving more protection for settlement. Understanding how your policy handles legal costs is important, especially for professional services.
4. Approval or denial: If your claim is approved, the insurer issues payment (minus your deductible/SIR). If it’s denied, the insurer must explain why, and you have the right to appeal.