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What you need to know when filing your first insurance claim

If you've never filed an insurance claim before, it can be confusing. This article will help first time claimants navigate some of the finer points of filing an auto or property insurance claim.

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Car and house problems are no fun — especially when they're caused by theft, vandalism, a natural disaster or a collision. Fortunately, if you have the appropriate insurance policies in place, they can help with repairs and reduce the financial impact.

But let's be honest. All you want is to get your home or car back to normal and put the incident behind you. Whether you found a water leak in your home or maybe you were involved in a car accident, confusion can set in trying to quickly figure out the first step to take.

Do you call a vendor like a plumber or a tow company right away? Do you hit Google searching for contractors? At what point do you contact your insurance company?

If you plan to use your insurance benefits, you'll need to go through the claims process.

While insurance companies like USAA aim to make claims as quick and painless as possible, sometimes things can get complicated. Between finding a trusted contractor to complete the repairs and receiving the payout from your insurance company, you might feel stuck in the middle.

Your insurance company may have a preferred provider or contractor network to help expedite your claim. Some states use assignment of benefits, or AOB, clauses to allow contractors, such as roofers and mechanics, to work with insurance companies and spare policyholders from playing the middleman.

What is a preferred repair facility or contractor network?

I went through a water claim in my home some time ago. Our living room ceiling started to bulge from a leaky bathtub supply line above it. After shouting some colorful words and shutting off the main water line to the house, I started down the path to get my house fixed.

I have a family friend that is a plumber, and he was able to come out quickly and cap off the leaking line. We were referred to a water mitigation company to help dry out and from there the process was clunky at best. It wasn't until I contacted USAA directly that we got clarity on what my claims process would look like and what my benefits would be.

Contacting your insurance company at first point of loss can be helpful. Many insurance companies work with a network of trusted vendors, contractors and repair facilities. Some of the advantages of working with your insurance company directly can be expedited payments or work approvals compared to other vendors outside of their preferred networks.

No matter if you elect to go with a preferred vendor or your own contractor, it's important to read and understand any estimates or agreements that are put in front of you.

Things like an Assignment of Benefits (AOB) are often used to expedite claims but there are important considerations that policyholders should know.

How does an Assignment of Benefits clause work?

If your insurance contract includes an AOB clause, you can allow a third party to "stand in your shoes" and seek payment from your insurance company.

An AOB is intended to make things quicker and easier on policyholders. Since insurance claims can get a little tricky, it can be challenging and time-consuming to navigate, especially if you've never had to file a claim in the past.

For a car claim, signing an AOB means you just drop off your ride to get repaired and pick it up when it's done. The vendor then sorts out the details of getting paid by your insurance. Pretty straightforward, right?

But using an AOB doesn't mean "risk free." This is why you should thoroughly read and understand any document put in front of you during a claim.

AOB challenges for insurance policyholders

While an AOB authorizes the third party to act, one problem with removing yourself from the claim process is that now you're not part of the claim process. Not such a big deal if your repairs get done on time and to your satisfaction. But what if you have questions about your repairs? What if there's an unexpected delay?

When you sign an AOB for your insurance policy, the repair shop or contractor becomes the policy beneficiary for the claim — not you. As a result, you may lose transparency and control over your claim. Your insurance company may even be limited in what it can do to help.

This underlines why it's so important to know and understand what you are signing. It can impact what rights you have during a claim.

Let's say you had a leak in your home and begin work with a contractor to repair the damage and manage the claim on your behalf. Maybe the work stalled or you were presented with explanations of the scope of work. Something may seem fishy and you want to get to a resolution. Signing an AOB may limit what your insurance company can tell you or do to support you.

Unfortunately, AOBs have been associated with fraud and increased litigation in some states. The aggregate impact of inflated claims costs and lawsuits ultimately may impact policyholders with increased premiums or poor claims experiences.

What should you do when filing a claim?

First and foremost, contact your insurance company. They can provide next steps for your situation. Take pictures of your home or vehicle and document what happened as best as you are able. If you go direct to a vendor or contractor first, read and understand any documents that require your signature.

Second, know who you're doing business with. Find reputable vendors or seek direction from your insurance company if there is a preferred vendor to use. AOBs are legally binding, and they can give vendors power to exaggerate the scope of your claim, with or without your knowledge. So, it's important to work with a vendor you can trust.

Lastly, make sure you have a clear understanding of your policy and what you should expect during the claims process. Use our helpful guides for more details:

Always keep an eye out for AOB clauses on any document from a third-party vendor to make sure to weigh out the pros and cons. Don't unknowingly sign away your rights or policy benefits.

Most insurance companies want to make it easy to file your own claims. They want to keep you as a happy customer. Filing your claim on your own can help you keep control of the policy benefits you pay for. And if you do elect to use an AOB, just make sure you fully understand it before you sign.

Check your insurance coverage.

Review your policy benefits and limitations so you can be in control during a claim.