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How are Insurance Claims Payouts Made?

March 29, 2022 | Insurance 101

It’s crucial that companies have the right insurance for small business. Just as importantly, when incidents occur and insurance claims are made, insurance claims payouts should happen quickly and efficiently.   

What is Small Business Liability Insurance?

Are you wondering, “How do insurance claims work?” Before talking about the insurance claims payment process for small business insurance claims, it’s important to be clear about what small business insurance is. Small business liability insurance coverage provides financial protection from a variety of risks that small businesses face. This includes:

  • Worker injuries
  • Natural disasters
  • Professional mistakes
  • Non-employee injuries
  • Damage to customer property
  • Vehicle accidents
  • And many others...

If an incident occurs and it’s covered by a small business liability insurance policy that you’ve purchased, you file a claim with your insurance company. For example, if your employee causes damage in a customer’s home—maybe they accidentally start a fire—and the customer sues your company, your general liability insurance policy may cover insurance claim payout costs associated with the lawsuit.

What is Small Business Liability Insurance?

Are you wondering, “How do insurance claims work?” Before talking about the insurance claims payment process for small business insurance claims, it’s important to be clear about what small business insurance is. Small business liability insurance coverage provides financial protection from a variety of risks that small businesses face. This includes:

  • check
    Worker injuries
  • check
    Natural disasters
  • check
    Professional mistakes
  • check
    Non-employee injuries
  • check
    Damage to customer property
  • check
    Vehicle accidents
  • check
    And many others...

If an incident occurs and it’s covered by a small business liability insurance policy that you’ve purchased, you file a claim with your insurance company. For example, if your employee causes damage in a customer’s home—maybe they accidentally start a fire—and the customer sues your company, your general liability insurance policy may cover insurance claim payout costs associated with the lawsuit.

Types of Liability Insurance for Small Businesses

At biBERK, we offer seven types of liability insurance for small businesses:

  1. Workers' compensation insurance
  2. General Liability Insurance
  3. Business owners policies or BOPs (also called property & liability insurance)
  4. Professional liability insurance (also called errors & omissions insurance)
  5. Commercial auto insurance
  6. Umbrella insurance
  7. Cyber insurance

These critical coverages provide protection from essentially any type of incident that a typical small business might experience. 

Important Considerations for Getting Small Business Liability Insurance Claims Paid

When a covered incident occurs, the amount paid to your company is determined by an insurance adjuster and others at your insurance company who review the evidence. In order to ensure your small business liability insurance claims get paid fully and promptly, it’s important that you take these actions: 

  • Get familiar with each policy you have. You shouldn’t assume that you know what’s covered by a policy based solely on its name. Also, every type of small business insurance policy has certain exclusions—meaning things it doesn’t cover. Reading your policy carefully or talking with a biBERK insurance expert ensures that you won’t be caught off guard by a cost you thought the policy would cover. Plus, you may become aware of coverage gaps. If you do, you can get the additional coverage you need before an incident occurs. 
  • Report claims promptly. Proper compensation for an incident depends, in part, on how accurately you’re able to describe what happened. The sooner you report a business insurance claim, the fresher the details will be in your mind. In addition, some small business liability insurance policies specify that you must report claims within a certain timeframe. If you fail to do that, the claim might not be covered. 
  • Carefully and fully document the damage. When an incident occurs, you should record all the pertinent information about it as soon as possible. This includes making notes about the date, time, and location of the incident, and taking photos of any damage related to the claim. You should also retain copies of any correspondence you send or receive related to the event—letters, emails, text messages, etc. Since digital correspondence is common today, you may want to create a separate folder for claim-related email messages.  
  • Retain damaged items. Taking pictures of claim-related damage is important, but don’t discard items after capturing those images. Physical evidence is necessary for a proper assessment of the incident. 
  • Never admit your business was at fault. Taking the blame for an incident like a visitor getting injured on your property can come back to haunt you in a lawsuit. It may also give the person who was injured the impression that they should file a lawsuit. Your insurer and others will determine who is responsible if an accident occurs. Provide and/or call for assistance from first responders if appropriate, but don’t discuss fault, even if the injured party encourages you to do so or says they won’t hold you responsible. 
  • Engage with your insurance company during the insurance claim payment process. Getting a claim paid should be a collaborative process.  

As for how you actually receive funds from your insurer, that can vary by insurance company, the amount of the payout, etc. Keep in mind that it’s a good idea to talk with your financial advisor about the tax implications of receiving an insurance claim payment. 

What Does Basic Business Insurance Cost?

Basic business insurance costs vary based on the type of policy as well as details about your business like the size of your company, the type of business you’re in, your claims history, etc. But it’s easy to get free, self-service quotes online for all the policies you need. Simply provide a little bit of information and you’ll have figures in a matter of minutes. 

Then you can develop the business insurance strategy that best protects your business from the risks you face. And the best part is that with your insurance plan in place, you can focus on your business rather than worrying about “what if” liability scenarios.

Who are the Best Business Insurance Providers?

If you’re researching the best business insurance providers, there are a few things to keep in mind. For example, you want to work with a company that has significant experience in small business insurance. It may be appealing to go with a startup that offers very low rates in an attempt to build its customer base, but their lack of experience could hurt you if an incident occurs and they don’t handle it properly. 

You should also look for a business insurance provider that has ample financial resources for paying claims. If they can’t pay yours, you may be stuck with a large financial burden. And finally, you should find a company that has a long list of happy customers.  

biBERK is part of Warren Buffett's Berkshire Hathaway Insurance Group. We have millions of satisfied customers, more than 75 years of insurance experience, and $38 billion in paid claims in 2020, so we check all the boxes on the list of requirements! Plus, we sell directly to you with no middleman or broker, so we can offer insurance at up to 20% less than other companies.