What is a loss and how is one processed

It's important to know exactly what a loss is, and how it's processed between the insurance company and policyholder
Home insurance, car insurance, health insurance, pet insurance -- the list goes on and on and it more or less corresponds to any sort of problem or situation that we may confront in life. That is what insurance is for, to act as the silent guardians that act only when we need them, according to what the policy states. And that time of need is known as a loss.
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There are all kinds of losses: a car accident, a broken pipe in your home, an injury, loss of a crop harvest after a storm, etc. In short, a loss is any unfortunate act that we are protected against under an insurance policy. When a loss occurs the protection contained in the policy is activated, which will take the form of full or partial compensation for the costs that this event has produced.

What do you need to do if a loss occurs?

A loss is always an unfortunate event that can cause us to experience stress and worry. However, in such cases it is important to stay calm and remember a few simple steps that most insurance companies recommend to their customers, and which are in fact included in Spain's Law 50/1980 on Insurance Contracts.

  • Try to mitigate the damage: Whenever a loss occurs, the policyholder must try to minimize the amount of resulting damage. For example, if a pipe breaks in your bathroom, the first thing you must do is turn off the water main in an effort to prevent the rest of the house from being damaged as well. However, it is also worth mentioning that personal safety must always take precedence over any material objects.
  • Provide notification of the loss: once the situation has stabilized, the policyholder must notify the insurance company, providing the most complete information possible regarding the details surrounding the loss. It is possible that the insurance company will give the policyholder instructions about how to reduce the damages produced by the loss. The law provides a maximum time period of 7 days to provide this notification to the insurance company.
  • Moreover, if the loss has affected other people and we know that our insurance can cover their damage, we should inform those people of the existence of the above-mentioned insurance.
  • In the same way, if the loss has been caused by a third party and they offer to cover the damage, we must inform our insurer.
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These are the key points to follow when a loss occurs. Once your insurance company has been informed about the loss, a process begins that will tend to follow the steps described below.

  • Opening of the case file: in order to allow the loss to be recorded, the policyholder can call the customer service phone line made available for this purpose, or else go in person to the company's offices. Once the insurance company receives the information on the loss, a file is opened that will contain all of the information related to this event.
  • Study of the loss: After the file has been opened, the insurance company will perform a preliminary study to verify that the loss is covered by the terms of the insurance policy contracted. If the damages are covered by your policy, the insurance company will take charge of repairing them or else will provide monetary compensation. If the damages are not covered by the policy, the insurance company can reject the claim.
  • Assessment of the loss: if the insurance company decides it will cover the loss, a new phase then begins to assess the damages. The causes of the loss will be studied at this point and the amount that the insurer must provide as compensation will be quantified, which is the amount that will allow the customer to repair the damage suffered.
  • Resolution of the loss: all of these procedures result in resolution of the loss by payment of economic compensation, or else by repairing the damage suffered, as long as the process has proceeded normally and according to the terms of the policy. On the other hand, the insurance company can refuse to provide compensation if there have been irregularities, or if their expert determines that the damages are not covered by the policy contracted. As another possibility, the insurance company may provide partial compensation if the amount of the damage exceeds the maximum coverage contracted, or may refuse to provide any compensation at all if irregularities have existed, or if its expert determines that the damages are not covered by the policy contracted.

This is a brief summary of how a loss is processed, from when it occurs until the final settlement of the loss.

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