How are partial loss insurance claims handled?

Q:

How do insurance companies handle claims for partial losses?

A:

A partial loss refers to property that has been damaged but is still functional. Despite the differences between them, insurance claims on partial losses are handled in much the same way as total losses.

Losses must be reported as soon as practicable (either directly to the insurer or to your insurance agent or broker). The insurance company will assign an adjuster and the claims are investigated. As the insured, you must provide reasonable assistance with the insurer's investigations, and you are eventually indemnified.

The only major difference between partial loss and total loss claims is that co-insurance will apply only to partial losses. A co-insurance requirement of 80% is one that requires an insured to buy a limit of insurance of at least 80% of the property's value. If not, a co-insurance penalty may apply to reduce the amount of indemnity paid by the insurer. Co-insurance is waived, however, for total losses, losses under $5,000, or losses that are less than 2% of the property's value (whichever is lesser).

An important thing to note about partial losses is the Pair & Set Rule (also known as the Parts Rule). This rule states that the loss of an item does not constitute loss of the full set. The remaining item(s) in a pair or set is deemed to still have value so the insurer will only pay for the lost item.

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About the Author: (Director of Education at PNC Learning)

Jacques grew up around the insurance industry and began actively participating in 2013. Since then, he has gotten a Level 2 license, won Insurance Council of BC awards in 2015 and 2020 for academic excellence in the insurance licensing courses. He educates insurance professionals through PNC Learning and as a Thought Leader at ReFrame Insurance.

In his day job as an insurance broker, he helps businesses with creative risk management solutions and strategic advice when it comes to insurance.

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