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How are Insurance Claims Handled in Texas?

An insurance claim is an application submitted to an insurance company for compensation for insured losses. Upon filing, the insurance company evaluates the information, and if authorized, pays the affected party. If the claim is denied, the insurance company will not issue any payment. Texas insurance claims may arise from death benefits, property damage, lost income, medical expenses, and other losses and damages suffered.

Insurance claims may be made by the policyowner or by a third party. An insurance claim made by the policyowner is referred to as a first-party insurance claim. Third-party insurance claims are called liability claims. Third-party claim is when a person or an organization who is not the policyholder, makes a claim against the insurance policy for insured loss or damage.

The TDI 2020 Annual Report reported that according to financial accounts filed by licensed insurers and HMOs in 2019, claim payments in Texas totaled $141.3 billion. Property and casualty insurance claims are the most common claims in Texas.

Chapter 542 of the Texas Insurance Code deals with the processing and settlement of claims by insurers in the state. If an insurance claim has been unfairly denied, report this to the Texas Department of Insurance by filing a complaint using its online Insurance Complaint Process or calling (800) 252-3439.

Types of Insurance Claims in Texas

There are as many various types of insurance claims, as there are types of insurance:

PROPERTY and CASUALTY claims

Property and casualty insurance is a broad term used for different forms of insurance. This includes homeowners insurance, renters insurance, business insurance, and auto insurance. Property and casualty insurance generally have two types of coverages, namely liability coverage and property protection coverage. Property and casualty insurance claims cover losses (damage) for which the policyowner is responsible.

HEALTH INSURANCE claims

Health insurance claims are made by the insured or their health provider when the insured receives health care or fills a prescription insured under the insurance policy.

LIFE INSURANCE claims / Death Benefit:

Upon the death of a person covered by an active life insurance, the policy's beneficiary files a claim with the insurance company to receive the policy's proceeds called the death benefit. It requires submitting a claim form, death certificate, and, in some cases, the original policy. Prior to paying out, the insurer must confirm that the insured's death did not fall under a contract exclusion, like suicide or death caused while participating in a criminal act.

ANNUITY claims

An annuity is a contract that guarantees income for a set number of years or for the rest of one's life. An annuity is a financial product that protects a person against outliving their money. Annuities are a mechanism for the accumulation of money and the disposal of an estate, not life insurance.

AUTO INSURANCE claims

are filed when:

  • The insured is involved in a car accident with another driver

  • The insured's car is stolen

  • A collision damages the insured's car, or

  • The insured's car injures another person and/or damages their property.

HOMEOWNERS INSURANCE claims

Home insurance claims are submitted for damages to or on the property. This includes damage by fire, windstorm, lightning, or hail, burglary or vandalization, or injury on the property. Homeowners insurance usually does not cover earthquakes, floods, landslides, sinkholes, or sewer backups, except if the policyholder opts to get a separate coverage to insure these specific risks. Condo owners insurance claims are a bit different, since condo insurance does not cover the exterior of the property, just the interior.

RENTERS INSURANCE claims

Renters insurance claims are requests for reimbursement regarding insured damages to or theft of personal property, personal liability damages, emergency medical expenses, and possibly additional living expenses. This insurance claim arises from internal and certain external disasters.

COMMERCIAL (Business) INSURANCE claims

A business insurance claim is a formal request to the business' insurer informing them of the loss or damage suffered and requesting compensation for the insured loss. Commercial insurance claims fall into five main categories: business property damage, transportation and shipping insurance, business interruption, business liability, and employee-related coverages.

How Does an Insurance Claim Work in Texas?

When loss or damage occurs, a policyowner or an insured requests the insurance company to compensate for an insured loss. The insurance company reviews and investigates the claim, and it either approves or denies the claim. When the claim is approved, the insurance company issues a payout.

There are many forms of insurance in Texas – auto, business, health, home, life, renters, and lots more – and each has its own claims process when the loss occurs. Although the process may differ for each, there are few similarities in all insurance claims processes. The main action required is reviewing the details of the policy coverage to determine the damage or injury suffered by the insured. It will also reveal terms of the policy such as deductibles, out-of-pocket payments, limits, and exclusion terms. Understanding the rights and obligations under the Texas policy is important for filing a successful insurance claim. While various terms relating to insurance claims in a policy may differ, the following terms are required to be present in any insurance policy contract:

  • Timeframe for notice of claim: The insured or beneficiary must give the insurer written notice of claim for loss within a particular time. The time usually starts to count after the occurrence or beginning of the insured loss.

  • Receipt of notice of claim: According to the Consumer Bill of Rights in Texas, in not more than 15 days after the notice of claim, an insurer must:

    • acknowledge receipt of the notice of claim

    • begin the investigation of the claim, and

    • request all relevant information from the claimant by providing claims forms not more than 15 days after receiving notice of claim.

An insurer may request additional information from the insured, if it is needed during the investigation of a claim. If the insurer does not send claim forms within the prescribed time, the claimant is considered to have met the requirements to prove a loss under the policy.

  • Proof of Loss: The insurance claimant must provide the insurer with written proof of loss within a time specified under the policy. Proof of loss requires information regarding the occurrence, character, and extent of the loss for the claim. It must be written and submitted within the time specified in the policy. It may be sent through a means accepted by the insurer. Common methods of sending written proof of loss include mail, fax, or email. However, if providing proof within this timeframe was not reasonably possible, and you failed to submit it in time, this does not mean that your claim gets dismissed, or that it does not pay out. For example, if you experienced the death of a family member during the prescribed time, you have a reasonable excuse for why you could not submit a proof of loss.

  • Notice of acceptance or denial of claim: In Texas, a claimant must be notified in writing of the insurer's acceptance or rejection of a claim within 15 business days after receiving all items, statements, and forms necessary to confirm conclusive proof of loss. If the claim is rejected, the notice must specify the reason(s) for the rejection.

  • Time of payment of claims: There is a prescribed time for payment of claims. This term is outlined in the contract and varies depending on the type of insurance. For instance, Texas life insurance policy must provide settlement after the insured's death no later than two months after the date of receipt of proof. Generally, once the insurer notifies a claimant that a full payment of claims or a partial payment will be made, the insurer must issue the payment within five business days after sending the notice. If there is a condition that must be fulfilled before payment, such as the performance of an act by the claimant, the insurer must issue the payment not more than five business days after the act has been performed

  • Delay in payment of claim: Delay in payment of claims makes the insurer liable to pay damages and other penalties. According to section 542.058 of the Texas Insurance Code, in general, the insurer has no more than 60 days to pay out the claim, after receiving all the necessary forms from the claimant. The timeline can be longer if it is clearly explained and agreed to in the insurance contract.

Texans should be aware that if an insurer delays the payout of a claim in Texas, the claimant may be entitled to 18% (or more) annual interest on the money that was not paid out according to the timeline described in the contract (542.060). The insurer will be also liable for paying for attorney's fees and multiple other fines and charges.

How to File an Insurance Claim in Texas?

Depending on the damage suffered and the type of insurance, an insured person may file an auto, health, home, life, or liability claim. While the claims process differs slightly between the types, they all follow a similar format:

  • Notify the insurer: The claimant must provide a written notice of the claim. It may be given by or on behalf of the insured or the beneficiary. The filing process for a notice of claim usually depends on different factors required by the insurance company. It could require mailing documents, contacting a representative, using the company's app or website, in-person application, or a mix of these actions. This should be done within the time stipulated by the policy.

  • Proving the Loss: After the notification, the insurer provides the claimant with forms to fill out. Such forms let the claimant explain the damage and the amount of compensation they are seeking from the insurer. In most cases, the claimant must list dollar amounts, as well as provide images or videos of the damage, if applicable. For life insurance claims, the beneficiary must submit a claim form along with a death certificate. In some cases, the insurance company may also require the submission of the original policy documents.

  • Appraisal of damage or loss: The insurer's adjuster comes to inspect the damage for property and casualty insurance claims. The claimant should remain nearby during the inspection, to ensure that they do not miss anything. If possible, a contractor or a builder who will be repairing the damage should be there too, to discuss estimates or technical specifications with the adjuster or the insurance company.

Generally, to file a successful insurance claim, the claimant must understand the policy. This includes the coverages, deductibles, and limits. This is to know whether the loss is insured or the damage is not less than the deductible before filing.

How Late Can you File an Insurance Claim?

An insurance claim should be filed within the time prescribed in the policy contract. Generally, a claimant is advised to file an insurance claim promptly, however, a delayed or late claim is not usually prejudicial to the success of the claim. This is because an insurance company cannot deny a claim based on a technicality, such as when the claim was filed. It is only when the late submission of a claim is detrimental to the insurance company that it can be used as a justification to refuse the claim. Otherwise, the insurer may be held liable for denying a claim in bad faith.

An insurance claim that has been unfairly denied can be reported to the Texas Department of Insurance through its online Insurance Complaint Process or by calling (800) 252-3439.

Can I Cancel my Insurance Claim in Texas?

Yes, you can cancel your insurance claim by simply contacting the insurance company and informing them of your intention to cancel. Claimants usually cancel insurance claims to prevent their premiums from increasing, particularly when the damage or loss does not cost a lot and can be easily covered.

How Long Do you Have to File an Insurance Claim in Texas?

Generally, there is no prescribed time in Texas for filing an insurance claim. However, for accident and health insurance claims (1201.211), the claimant must provide a written notice of claim not more than 21 days (three calendar weeks) after the date when the loss covered by the policy occurred or began, or as soon after that date as is reasonably possible.

How Long Does an Insurance Company Have to Investigate a Claim in Texas?

According to the Texas Department of Insurance Consumer Bill of Rights, upon receipt of notice of claim and proof of loss, an insurer must notify a claimant of acceptance or denial of the claim within 15 days. During this time, the insurance company must have concluded all investigations of the claim.

How Long Does an Insurance Claim Check Take?

In Texas, an insurance company is required to pay an insurance claim within five business days after the claim has been approved. For a life insurance claim, settlement after the insured's death must be made no later than two months after the receipt of proof.

Most Texas insurers follow the following timelines: up to 15 days to investigate the claim, upto 45 days to accept or reject the claim, and up to 5 days (20 days for Surplus carriers) to pay out the claim. If the claim is delayed beyond the 60 days, the Texas insurer is liable to pay the insured interest for the unpaid claim, in the amount of 18% annually (Sec. 542.060).

Can a Closed Insurance Claim Be Reopened in Texas?

Yes, a closed insurance claim can be reopened in Texas. A claimant can contact the insurance company with reasons why the insurance claim should be reopened. It is advised that the process be done with professional help from a qualified attorney. It should be noted that when an insurer closes a claim file, it triggers the running of the Statute of Limitations in Texas. The Statute of Limitations is the state law that provides a limited time for the instituting some types of actions. The Statute of Limitations for insurance claims in Texas is two years. That is, you must institute an action ​​within two years after the cause of action accrues.

Can you Cancel an Insurance Claim?

Yes, you can cancel an insurance claim. This is done by contacting a representative of the insurance company and telling them that you want to cancel a claim.

Can you Keep Insurance Claim Money?

Yes, a claimant is allowed to keep the remaining money from an insurance claim in Texas. As long as nothing in writing states that they must return the unused claim money, they are free to do so. For example, you can have extra money from a home insurance claim because you saved money by doing the work yourself or your contractor's expenses were lower than the budget. However, the claimant must not commit insurance fraud in the process of getting the insurance claim money. An example of this would be when you report previous harm on a current claim or pass off an old damage from a water loss as recent damage covered by extensive weather damage.

Can an Insurance Company Deny a Claim?

Yes, an insurance company can deny a claim. If an insurance company denies a claim, it must inform the claimant of the reason(s) for the denial.

What to Do if Insurance Denies Claim?

When processing claims, insurance firms are required under Texas law to act in good faith and fairly. This means that they cannot simply refuse to compensate the insured when a filed claim is covered by the policy's terms. Insurance companies are prohibited from dealing in unfair settlement practices. Unfair settlement practices include acting in bad faith regarding the settlement of a claim or refusing to pay a claim without proper investigation.

If a Texas claim is unfairly denied, a claimant may:

  1. Appeal to the insurance company to reconsider the denial decision. This appeal results in the second review of the policy language, which explains how the damage or loss is meant to be compensated;

  2. Contact the Texas Department of Insurance by calling (800) 252-3439 or submitting a complaint online; or

  3. Contact a lawyer to negotiate with the insurance company and pursue further actions where necessary

How to Settle an Insurance Claim in Texas without a Lawyer?

The best way to settle an insurance claim without a lawyer in Texas is to have a trusted and knowledgeable insurance agent help you. Texas health insurance agents offer free help by either helping you make your claim or advising you on what to do and what further steps to take.

If you do not have a lawyer or an agent, you should take note of the following:

  • Understand your and the other party's rights

  • Know the terms of the insurance policy

  • Evaluate the extent of damage or loss (see your specific type of insurance FAQ for more information)

  • Ask questions if certain things look unclear, such as insurance terms, processes, and obligations (both from you and your insurer).

  • Request prompt response from the insurance company

  • Use digital copies, retain all claim documentation and emails, all important facts need to be communicated in writing, so an email is the best way. If using the insurer's internal communication system, make sure to download or print out records - in case you can't access the system later - and all your files are there.

  • Document correspondence with the insurance company and its representatives, including dates of communication, names of representatives that were communicated with, their department or position, and contact information.

  • Ask for a translated version of your policy if English is not your first language.

Insurance Denied my Claim Now What?

There are three lines of action a claimant may take if an insurance claim is denied in Texas. First, an appeal can be made to the insurance company to review the decision. This request should provide specific reasons why the denial is not accurate based on the policy's provisions. If this appeal is still rejected, a complaint may be made to the Texas Department of Insurance by using its online Insurance Complaint Process or calling (800) 252-3439. Lastly, court action may be instituted with the help of a qualified attorney, if the claimant believes that the denial was made in bad faith.

Can an Insurance Company in Texas Deny a Claim?

Yes, an insurance company in Texas can deny a claim. But the company must provide the claimant with the reason(s) for the denial of the claim.

What to Do if an Insurance Company Denies your Claim in Texas?

If you believe that the denial was unfair, you should contact the Texas Department of Insurance by calling (800) 252-3439 or filling out the complaint form online.