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The word “float” used to mean writing a check at the grocery store on Wednesday when you knew you didn’t have enough in your account, hoping the bank would not cash it before payday on Friday. That grace period was the float. With debit cards, that old version is mostly gone.
The idea of float is still around, but it has taken on a negative connotation. I see this myth often in my work as an expert witness, and it frustrates me the most. It undermines trust in the claims process and reflects a misunderstanding of how insurers actually earn money.
Insurers have two main sources of revenue: premiums and investment income. Insurers collect premiums up front and pay claims later. On their own, auto and home premiums are not enough to cover all claims and operating expenses. To supplement that, insurers invest premium dollars. The interest earned helps pay company expenses and keeps premiums from climbing even higher.
Some policyholder advocates oversimplify this process, stating that carriers know they must pay a claim, but they hold off as long as possible to keep earning interest. The suggestion is that claims departments intentionally delay cutting settlement checks, so the company can profit from the float.
State regulators require insurers to set aside a specific amount of money to pay claims and expenses. For example, one requirement might be for insurers to set aside 1.5 percent of funds for every dollar of premiums collected. Because those funds are already earmarked, and the investment income is not tied to one particular claim, there is no incentive to delay claim payments just to earn more interest. The money is set aside for that purpose from the start to pay the claim.
In my experience, delays are almost always tied to other issues: missing documentation, waiting for a contractor’s estimate or needing upper management approval for a large payout. These situations can slow the process, but they are procedural, not financial strategies.
What you can do:
Insurance can seem complex, leading people to rely on simplified phrases or common sayings to understand it. Over time, these shortcuts evolve into myths. These myths can create unnecessary tension between policyholders and the people working their claims, so if you’re ever skeptical about how your policy or claim is being managed, ask questions for clarification. Your agent or adjuster has insights into procedural details, and the answer is probably simpler than you’re imagining.
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Your responses are anonymous and will only be used for improving our website.
Help us improve our content
People rely on fables or common phrases to make sense of complicated ideas. If Jack works all day, he is going to be a dull boy. If you keep making that face, it will freeze like that. These shortcuts help us explain the world, and insurance is no different.
Because the claims process can feel overwhelming, simplification often turns into myth. Some myths start with a grain of truth. Others stem from misunderstandings of how coverage works. Some myths are easily dispelled — for example, it’s often claimed that red cars cost more to insure. But others are more persistent. And a few have been repeated so often that they sound like fact.
Let’s break down three myths I see come up frequently in my day-to-day as an adjuster.
One of the most common myths in liability claims is that the value of a bodily injury settlement is calculated as “three times medicals.” In other words, if your medical bills after an accident total $5,000, you should expect a settlement of $15,000.
Many claimants come into negotiations believing this is the standard, even the law. It is not. No formula determines settlement value. Each claim is evaluated on its own facts.
When adjusters calculate the value of a bodily injury claim, they look at a range of factors, including:
What you can do
It is difficult to be objective about your own claim, but these steps can help you understand how the adjuster reached their numbers:
Overall, the adjuster’s goal is to reach a settlement that fairly compensates for losses and expenses, while also taking into consideration any applicable insurance policies, state laws and other factors that may affect the final settlement amount.
This myth persists because much of the claims process happens behind the scenes. Policyholders often assume adjusters are rewarded for issuing denials or delaying payments, which makes the process feel adversarial.
The reality is different. Adjusters are not paid to deny claims. In fact, the metrics we are judged on often include how quickly and fairly we resolve claims. Regulators set standards for timeliness, documentation and communication. Supervisors audit claim files to ensure those standards are met.
Claims are denied when the loss is not covered by the policy, not because denial is the goal. Most homeowners have open peril dwelling policies, which mean that all losses to the home’s structure are covered except what is specifically excluded. To determine if coverage is applicable, the adjuster must look at the exclusions, and if none are appropriate, the claim moves toward payment.
It is also important to remember that insurance policies are not warranties or maintenance contracts. As a homeowner or driver, you are responsible for upkeep. I handled a home insurance claim where hail damage was alleged, but the inspection showed the roof had years of wear and tear with no signs of fresh hail impact. The policy covered sudden and accidental damage, not gradual deterioration. The claim was denied.
What you can do:
The word “float” used to mean writing a check at the grocery store on Wednesday when you knew you didn’t have enough in your account, hoping the bank would not cash it before payday on Friday. That grace period was the float. With debit cards, that old version is mostly gone.
The idea of float is still around, but it has taken on a negative connotation. I see this myth often in my work as an expert witness, and it frustrates me the most. It undermines trust in the claims process and reflects a misunderstanding of how insurers actually earn money.
Insurers have two main sources of revenue: premiums and investment income. Insurers collect premiums up front and pay claims later. On their own, auto and home premiums are not enough to cover all claims and operating expenses. To supplement that, insurers invest premium dollars. The interest earned helps pay company expenses and keeps premiums from climbing even higher.
Some policyholder advocates oversimplify this process, stating that carriers know they must pay a claim, but they hold off as long as possible to keep earning interest. The suggestion is that claims departments intentionally delay cutting settlement checks, so the company can profit from the float.
State regulators require insurers to set aside a specific amount of money to pay claims and expenses. For example, one requirement might be for insurers to set aside 1.5 percent of funds for every dollar of premiums collected. Because those funds are already earmarked, and the investment income is not tied to one particular claim, there is no incentive to delay claim payments just to earn more interest. The money is set aside for that purpose from the start to pay the claim.
In my experience, delays are almost always tied to other issues: missing documentation, waiting for a contractor’s estimate or needing upper management approval for a large payout. These situations can slow the process, but they are procedural, not financial strategies.
What you can do:
Insurance can seem complex, leading people to rely on simplified phrases or common sayings to understand it. Over time, these shortcuts evolve into myths. These myths can create unnecessary tension between policyholders and the people working their claims, so if you’re ever skeptical about how your policy or claim is being managed, ask questions for clarification. Your agent or adjuster has insights into procedural details, and the answer is probably simpler than you’re imagining.
Why we ask for feedback Your feedback helps us improve our content and services. It takes less than a minute to complete.
Your responses are anonymous and will only be used for improving our website.
Help us improve our content
People rely on fables or common phrases to make sense of complicated ideas. If Jack works all day, he is going to be a dull boy. If you keep making that face, it will freeze like that. These shortcuts help us explain the world, and insurance is no different.
Because the claims process can feel overwhelming, simplification often turns into myth. Some myths start with a grain of truth. Others stem from misunderstandings of how coverage works. Some myths are easily dispelled — for example, it’s often claimed that red cars cost more to insure. But others are more persistent. And a few have been repeated so often that they sound like fact.
Let’s break down three myths I see come up frequently in my day-to-day as an adjuster.
One of the most common myths in liability claims is that the value of a bodily injury settlement is calculated as “three times medicals.” In other words, if your medical bills after an accident total $5,000, you should expect a settlement of $15,000.
Many claimants come into negotiations believing this is the standard, even the law. It is not. No formula determines settlement value. Each claim is evaluated on its own facts.
When adjusters calculate the value of a bodily injury claim, they look at a range of factors, including:
What you can do
It is difficult to be objective about your own claim, but these steps can help you understand how the adjuster reached their numbers:
Overall, the adjuster’s goal is to reach a settlement that fairly compensates for losses and expenses, while also taking into consideration any applicable insurance policies, state laws and other factors that may affect the final settlement amount.
This myth persists because much of the claims process happens behind the scenes. Policyholders often assume adjusters are rewarded for issuing denials or delaying payments, which makes the process feel adversarial.
The reality is different. Adjusters are not paid to deny claims. In fact, the metrics we are judged on often include how quickly and fairly we resolve claims. Regulators set standards for timeliness, documentation and communication. Supervisors audit claim files to ensure those standards are met.
Claims are denied when the loss is not covered by the policy, not because denial is the goal. Most homeowners have open peril dwelling policies, which mean that all losses to the home’s structure are covered except what is specifically excluded. To determine if coverage is applicable, the adjuster must look at the exclusions, and if none are appropriate, the claim moves toward payment.
It is also important to remember that insurance policies are not warranties or maintenance contracts. As a homeowner or driver, you are responsible for upkeep. I handled a home insurance claim where hail damage was alleged, but the inspection showed the roof had years of wear and tear with no signs of fresh hail impact. The policy covered sudden and accidental damage, not gradual deterioration. The claim was denied.
What you can do:
The word “float” used to mean writing a check at the grocery store on Wednesday when you knew you didn’t have enough in your account, hoping the bank would not cash it before payday on Friday. That grace period was the float. With debit cards, that old version is mostly gone.
The idea of float is still around, but it has taken on a negative connotation. I see this myth often in my work as an expert witness, and it frustrates me the most. It undermines trust in the claims process and reflects a misunderstanding of how insurers actually earn money.
Insurers have two main sources of revenue: premiums and investment income. Insurers collect premiums up front and pay claims later. On their own, auto and home premiums are not enough to cover all claims and operating expenses. To supplement that, insurers invest premium dollars. The interest earned helps pay company expenses and keeps premiums from climbing even higher.
Some policyholder advocates oversimplify this process, stating that carriers know they must pay a claim, but they hold off as long as possible to keep earning interest. The suggestion is that claims departments intentionally delay cutting settlement checks, so the company can profit from the float.
State regulators require insurers to set aside a specific amount of money to pay claims and expenses. For example, one requirement might be for insurers to set aside 1.5 percent of funds for every dollar of premiums collected. Because those funds are already earmarked, and the investment income is not tied to one particular claim, there is no incentive to delay claim payments just to earn more interest. The money is set aside for that purpose from the start to pay the claim.
In my experience, delays are almost always tied to other issues: missing documentation, waiting for a contractor’s estimate or needing upper management approval for a large payout. These situations can slow the process, but they are procedural, not financial strategies.
What you can do:
Insurance can seem complex, leading people to rely on simplified phrases or common sayings to understand it. Over time, these shortcuts evolve into myths. These myths can create unnecessary tension between policyholders and the people working their claims, so if you’re ever skeptical about how your policy or claim is being managed, ask questions for clarification. Your agent or adjuster has insights into procedural details, and the answer is probably simpler than you’re imagining.
Why we ask for feedback Your feedback helps us improve our content and services. It takes less than a minute to complete.
Your responses are anonymous and will only be used for improving our website.
Help us improve our content
