Recording Insurance claims payments

What are some good ways (I'm sure there are several options) to record a series of payments from an insurance company in settlement of a covered loss?

One option I considered was using the same category for the payment that I will use when disbursing the funds. i.e. If the claim were for a car accident, the check I receive could be categorized as Auto Repair, which would then offset the expense when I pay the body shop/mechanic.

However, in this case, it is not an auto accident and the repairs will likely be spread over more than one year. Therefore the insurance payments and repairs bills will not net out in a given year. For example, in year-one, I might receive $30k but only spend $8k on repairs. Then receive another $12k and spend $35k in year-two. And finally receive $11k and spend $13k in year-three. The amounts likely won't net out in the long run and will be significantly out of balance within each year.

Just to be clear, I am NOT looking for a way to force them to balance. I AM asking for advice on appropriate ways to record these payments consistently, ideally consistent with GAAP.

Thanks everyone

Answers

  • UKR
    UKR SuperUser ✭✭✭✭✭
    One possibility I can think of would be to create an "Insurance Reimbursement Account" (offline Asset or Checking account).
    Record any repair bills as transfer from your Checking or Credit Card account to the Reimbursement account. If you know that the insurance is going to cover only xx% of total, record a Split: xx% as transfer, remainder as expense to Auto:Repair
    Record any insurance payments you receive into your Checking account as transfer to the Reimbursement account, to offset the balance. Eventually, when the insurance has given you all the money it's willing to give you, the balance of this account should reach zero.

  • LeaningTower
    LeaningTower Member ✭✭
    > @UKR said:
    > One possibility I can think of would be to create an "Insurance Reimbursement Account" (offline Asset or Checking account).
    > Record any repair bills as transfer from your Checking or Credit Card account to the Reimbursement account. If you know that the insurance is going to cover only xx% of total, record a Split: xx% as transfer, remainder as expense to Auto:Repair
    > Record any insurance payments you receive into your Checking account as transfer to the Reimbursement account, to offset the balance. Eventually, when the insurance has given you all the money it's willing to give you, the balance of this account should reach zero.

    How would you suggest categorizing the payment from the ins. co. when deposited into my checking acct? Create a new category for insurance claims?
  • Jim_Harman
    Jim_Harman SuperUser ✭✭✭✭✭
    If you don't want to go to the trouble of creating a special account, you basically have two choices.

    The simplest is to record the insurance reimbursements as credits in whatever expense category you are using for the incident. Then that category will show your net cost.

    Or you can create an Insurance Reimbursements income category and record the reimbursements there. That makes it easier to separate out the total cost and total reimbursements.

    One additional thing you could do in either case would be to create a Tag for the incident. Then you can make a report that includes just that tag and you will see both the income and expenses.
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  • UKR
    UKR SuperUser ✭✭✭✭✭
    > @UKR said:
    > One possibility I can think of would be to create an "Insurance Reimbursement Account" (offline Asset or Checking account).
    > Record any repair bills as transfer from your Checking or Credit Card account to the Reimbursement account. If you know that the insurance is going to cover only xx% of total, record a Split: xx% as transfer, remainder as expense to Auto:Repair
    > Record any insurance payments you receive into your Checking account as transfer to the Reimbursement account, to offset the balance. Eventually, when the insurance has given you all the money it's willing to give you, the balance of this account should reach zero.

    How would you suggest categorizing the payment from the ins. co. when deposited into my checking acct? Create a new category for insurance claims?

    No. In both cases, reimbursements received as well as repair bills paid, the transaction is recorded as a transfer between the Checking or Credit card account and the Reimbursement Account. In the Category field you enter the name of the Reimbursement Account, surrounded by [square brackets], e.g. Category = [Insurance Reimbursement Account]
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