How to Record Insurance Claim Payment in QuickBooks Desktop and Online?

Recording an insurance claim payment in QuickBooks ensures that your financial records accurately reflect both the income from the claim and any associated expenses.

The process generally involves recording the payment as income or an “Other Income” type and properly categorizing the insurance-related expenses that the claim reimburses. By doing this, you’ll maintain clean records for both tax and bookkeeping purposes.

Process of receiving an insurance claim

An insurance claim payment refers to the compensation provided to a policyholder by the insurance company or adjuster as a result of a covered claim, typically involving reimbursement for damages, settlements, or policy benefits. 

These payments can encompass different types of claims, including property insurance, bodily injury, damaged goods, or liability claims. The process of receiving an insurance claim payment involves the policyholder submitting a claim, which is then reviewed by the insurance adjuster to determine the coverage and extent of compensation. Adjusters play a crucial role in assessing the validity of the claim and negotiating the payment amount. 

The insurance company validates the claim (or denies the claim). If it is approved, the insurance company will issue payment to the insured or an approved interested party on behalf of the insured. Insurance claims cover everything from death benefits on life insurance policies to routine and comprehensive medical exams. In some rare cases, a third party is able to file claims on behalf of the insured person, but generally, only the person listed on the policy is entitled to claim payments.

Why It’s Essential to Record Insurance Claim Payments in QuickBooks?

A paid insurance claim serves to compensate a policyholder against financial loss. An individual or group pays premiums as consideration for the completion of an insurance contract between the insured party and an insurance carrier.

The most common insurance claims involve costs for medical goods and services, physical damage, loss of life, liability for the ownership of dwellings (homeowners, landlords, and renters), and liability resulting from the operation of automobiles.

Recording insurance claim payments in QuickBooks is crucial for:

• Accurate transaction tracking and financial management.
• Maintaining a clear record of incoming payments from insurance companies and outgoing payments to suppliers or service providers. 
• Enables companies to streamline their accounts receivable and accounts payable management
• Improves efficiency in tracking outstanding balances.
• Enhances financial transparency
• Enables businesses to make informed decisions based on up-to-date financial data.

How to Record Insurance Premium in QuickBooks Desktop?

How to enter a manual Transaction for the Insurance Claim?

Below we’ve listed how to enter a manual transaction for the insurance claim you wanted to record. It can be easily implemented in QuickBooks Desktop.

Record Positive Equity from Auto Insurance Claim Payment in QuickBooks Desktop

The payment is not an income. You have to enter it as a deposit instead. Before moving ahead, create an account to track the entry.

Here are the steps to be followed:

Once Done, you Can Now Create a Bank Deposit

Let’s see how:

How to Record Payment Received for an Insurance Claim in QuickBooks Online?

Create an Income Account

To record the Insurance Claim payment in QuickBooks Online, You need to create an account to track the entry and then make a deposit. Adhere to the steps listed below.

Step 1: Click the Accounting menu on the left panel and then choose a Chart of Accounts to open the All Lists page.

Step 6: Fill out the remaining fields and then press the Save and Close tabs. 

Make a Deposit

Link the Other Income Account to a Job

Track and Categorize Insurance Claim Payments in QuickBooks Online

You are recommended to create a new account to categorize and track the insurance claim in QuickBooks Online.

Below are the steps for the same:

Step 1: Create a New Account

Step 2: Make a Bank Deposit

Once done, make a bank deposit and categorize it under the account created above.

Step 1: Click the + New button at the left navigation bar. Then, select Bank Deposit under Other. 

Recording Different Types of Insurance Claim Payments in QuickBooks

How to Record a Health Insurance Reimbursement Payment in QuickBooks?

Recording health insurance reimbursement payments in QuickBooks ensures accurate financial records and compliance with tax regulations. Below are detailed, step-by-step instructions for both QuickBooks Desktop and QuickBooks Online.

QuickBooks Desktop

Set Up a Health Insurance Expense Account

1. Navigate to the Lists menu and select Chart of Accounts.
2. Click Account at the bottom and choose New.
3. Select Expense as the account type and click Continue.
4. Name the account (e.g., “Health Insurance Expense”) and provide a description if desired.
5. Click Save & Close.

Create a Payroll Item for Health Insurance

1. Go to the Lists menu and select Payroll Item List.
2. Click Payroll Item at the bottom and choose New.
3. Select Custom Setup and click Next.
4. Choose Company Contribution and click Next.
5. Enter a name for the item (e.g., “Health Insurance Reimbursement”) and click Next.
6. Link it to the previously created Health Insurance Expense account and click Next.
7. Specify the Tax Tracking Type based on your requirements and click Next.
   • Ensure you choose the correct category based on whether the reimbursement is taxable or non-taxable.
8. Define any necessary tax settings and click Next.
9. Choose how the contribution is calculated (e.g., None for a flat amount) and click Next.
10. Click Finish to save the payroll item.

Assign the Payroll Item to Employees

1. Navigate to the Employees menu and select Employee Center.
2. Double-click the employee’s name to open their profile.
3. Go to the Payroll Info tab.
4. In the Additions, Deductions, and Company Contributions section, add the newly created health insurance item.
5. Enter the amount to be reimbursed and click OK to save.

Process Payroll with the Reimbursement

1. Go to the Employees menu and select Pay Employees.
2. Follow the prompts to enter payroll information.
3. Ensure the health insurance reimbursement appears correctly for the applicable employees.
4. Complete the payroll process to record the reimbursement.
5. Verify that the reimbursement is reflected in payroll reports (e.g., Payroll Summary, Paycheck Detail).

QuickBooks Online

Set Up Health Insurance Reimbursement

1. Navigate to Payroll > Employees.
2. Select the employee’s name.
3. Under How much do you pay [employee]?, click Start or Edit.
4. In the Additional pay types section, check Reimbursement.
5. If a specific reimbursement type is needed, click + Add another reimbursement type and enter a name (e.g., “Health Insurance Reimbursement”).
6. Enter a default amount if applicable, or leave it blank to enter the amount during each payroll run.
7. Click Save to apply the changes.

Process Payroll Including the Reimbursement

1. Navigate to Payroll > Run Payroll.
2. Select the appropriate pay schedule and click Continue.
3. For each employee receiving the reimbursement, enter the specific amount in the Reimbursement field.
4. Review the payroll details to ensure accuracy.
5. Click Submit Payroll to finalize and record the reimbursement.
6. Confirm that the reimbursement appears in payroll reports (e.g., Payroll Summary, Paycheck List).

By following these steps, you can accurately record health insurance reimbursement payments in both QuickBooks Desktop and QuickBooks Online.

How to Record a Vehicle Insurance Claim Payment in QuickBooks?

Recording a vehicle insurance claim payment in QuickBooks ensures your financial records accurately reflect the reimbursement. Here’s how to do it in both QuickBooks Desktop and QuickBooks Online:

QuickBooks Desktop:

1. Deposit the Insurance Payment:
   1. Navigate to the Banking menu and select Make Deposits.
   2. If the Payments to Deposit window appears, choose the relevant payment and click OK.
   3. In the Make Deposits window:
      • In the Received from column, select the insurance company or add it as a new vendor.
      • In the From Account column, select an appropriate account, such as Insurance Claims Receivable.
      • Enter the amount received.
      • Add any pertinent Memo details.
   4. Click Save & Close.
2. Record the Repair Expense:
   1. Go to the Vendors menu and select Enter Bills.
   2. Choose the vendor who performed the repairs.
   3. Enter the bill details, including the amount and date.
   4. In the Account column, select the appropriate expense account, such as Vehicle Repairs.
   5. Click Save & Close.
3. Apply the Insurance Payment to the Expense:
   1. Navigate to the Vendors menu and select Pay Bills.
   2. Choose the bill associated with the vehicle repair.
   3. Click Set Credits.
   4. In the Credits tab, the deposit from the insurance company should appear. Check the box next to it.
   5. Click Done, then Pay Selected Bills.

QuickBooks Online:

1. Record the Insurance Payment:
   1. Click the + New button and select Bank Deposit.
   2. In the Add funds to this deposit section:
      • In the Received From field, enter the insurance company.
      • In the Account field, select an account like Insurance Claims Receivable.
      • Enter the amount received and any relevant Memo.
   3. Click Save and Close.
2. Record the Repair Expense:
   1. Click the + New button and select Expense.
   2. Choose the payee (the repair vendor) and the payment account.
   3. In the Category column, select Vehicle Repairs or a similar expense account.
   4. Enter the amount and any other necessary details.
   5. Click Save and Close.
3. Match the Insurance Payment to the Expense:
   1. Click on Accounting in the left-hand menu, then select Chart of Accounts.
   2. Find the account where the insurance payment was deposited and click View Register.
   3. Locate the insurance deposit transaction and click on it to edit.
   4. In the Account field, change it to Vehicle Repairs (or the expense account used for the repair).
   5. Click Save.

Adjusting Entries for Insurance Claim Payments

How to Record a Refund from an Insurance Claim in QuickBooks?

To accurately record a refund from an insurance claim in QuickBooks, follow these detailed steps:

1. Deposit the Insurance Refund:
   1. Navigate to the Banking menu and select Make Deposits.
   2. If prompted, choose the bank account where the refund will be deposited.
   3. In the Payments to Deposit window, click OK.
   4. In the Make Deposits window:
      • Enter the date of the deposit.
      • In the Received From column, select the insurance company.
      • In the From Account column, choose the appropriate income account (e.g., Insurance Claims).
      • Enter a description, payment method, and the refund amount.
   5. Click Save & Close.
2. Record the Expense Related to the Claim:
   • Go to the Vendors menu and select Enter Bills.
   • In the Enter Bills window:
     1. Choose the vendor associated with the expense.
     2. Enter the date, reference number, and amount of the expense.
     3. In the Expenses tab, select the appropriate expense account.
     4. Add any relevant description.
   • Click Save & Close.
3. Link the Refund to the Expense:
   1. Navigate to the Banking menu and select Make Deposits.
   2. In the Payments to Deposit window, click OK.
   3. In the Make Deposits window:
      • In the Received From column, select the insurance company.
      • In the From Account column, choose the expense account used in the bill.
      • Enter the refund amount as a negative number.
   4. Click Save & Close.

Reconciling Insurance Claim Payments in QuickBooks

How to Match Insurance Claim Payments with Bank Transactions in QuickBooks?

Matching insurance claim payments with bank transactions in QuickBooks ensures accurate financial records. Here’s a step-by-step guide to help you through the process:

1. Record the Insurance Claim Payment:
   1. Navigate to the Banking menu and select Make Deposits.
   2. If prompted, choose the bank account where the payment was deposited.
   3. In the Payments to Deposit window, select the insurance claim payment and click OK.
   4. In the Make Deposits window, enter the following details:
      • Received From: Enter the insurance company’s name.
      • From Account: Select the appropriate income account or an account specifically for insurance claims.
      • Amount: Enter the exact amount received.
      • Memo: Optionally, add a note for reference.
   5. Click Save & Close to record the deposit.
2. Match the Deposit with the Bank Transaction:
   1. Go to the Banking menu and select Bank Feeds Center.
   2. Choose the bank account where the insurance payment was deposited.
   3. In the Bank Feeds window, locate the transaction that corresponds to the insurance payment.
   4. Click on the transaction to select it.
   5. Click Match to Existing Transaction.
   6. In the matching window, select the deposit you recorded earlier.
   7. Click Match to link the bank transaction with your recorded deposit.
3. Reconcile Your Bank Account:
   1. Navigate to the Banking menu and select Reconcile.
   2. Choose the bank account and enter the statement date and ending balance from your bank statement.
   3. Click Continue.
   4. In the reconciliation window, ensure the matched insurance payment appears and is correctly cleared.
   5. Once all transactions are verified, click Reconcile Now.

How to Create a Journal Entry for Insurance Claim Payments

Recording an insurance claim payment in QuickBooks involves accurately reflecting the received funds in your financial records. Here’s a step-by-step guide to creating a journal entry for such transactions:

1. Create an Insurance Claim Income Account:

1. Navigate to the Chart of Accounts.
2. Click on New to set up a new account.
3. For Account Type, select Other Income.
4. For Detail Type, choose Insurance Proceeds or a similar category.
5. Name the account (e.g., “Insurance Claim Income”).
6. Click Save and Close.

2. Record the Insurance Claim Payment via Journal Entry:

1. Click on the + New button.
2. Select Journal Entry.
3. Set the Journal Date to the date you received the insurance payment.
4. In the Account column, select the bank account where the funds were deposited.
   • Enter the received amount in the Debit column.
5. In the next line, select the Insurance Claim Income account you created.
   • Enter the same amount in the Credit column.
6. Add a Description (e.g., “Insurance claim payment for [specific event]”).
7. Click Save and Close.

3. Verify the Entry:

1. Go to the Chart of Accounts.
2. Locate and select the bank account used in the journal entry.
3. Review the transaction to ensure the insurance payment is accurately recorded.

Important Considerations:

• Consult with an Accountant: Insurance claim payments can have tax implications. It’s advisable to consult with an accounting professional to ensure the transaction is categorized correctly.
• Documentation: Keep all related documents, such as insurance claim details and correspondence, for future reference and auditing purposes.

Common Errors & Troubleshooting Methods While Recording Insurance Claim Payments in QuickBooks

How to Fix Common Mistakes While Recording Insurance Claim Payments in QuickBooks?

Accurately recording insurance claim payments in QuickBooks is crucial for maintaining precise financial records. However, several common errors can occur during this process. Here’s a detailed guide to help you avoid these mistakes:

1. Incorrect Account Selection: When entering an insurance claim payment, ensure you’re selecting the appropriate account.
   • Solution: Navigate to the ‘Chart of Accounts’ in QuickBooks. If the insurance claim payment pertains to a specific asset or expense, choose the corresponding account. For example, if it’s a reimbursement for a damaged piece of equipment, select the asset account associated with that equipment.
2. Misclassification of Income: Recording insurance proceeds as regular income can distort your financial statements.
   • Solution: Create a separate income account titled ‘Insurance Reimbursements’ or similar. This distinction ensures that these funds are tracked separately from operational income, providing a clearer financial picture.
3. Omitting the Deductible: Forgetting to account for the insurance deductible can lead to discrepancies.
   • Solution: When recording the claim, enter the total amount of the expense or loss. Then, record the insurance payment as a partial payment, with the remaining balance representing the deductible amount. This method accurately reflects both the expense and the out-of-pocket cost.
4. Neglecting to Record Depreciation: Insurance payments may account for depreciation, especially in property claims.
   • Solution: If the insurance payout is less due to depreciation, record the full replacement cost as the expense and the insurance payment as income. The difference, representing depreciation, should be recorded as an expense, ensuring your books reflect the true cost of the asset.
5. Failing to Reconcile Bank Deposits: Not matching the insurance payment to the corresponding bank deposit can cause reconciliation issues.
   • Solution: When the insurance payment is deposited into your bank account, use the ‘Make Deposits’ feature in QuickBooks. Select the ‘Insurance Reimbursements’ account (or the account you created) to ensure the deposit matches the recorded income, facilitating seamless bank reconciliation.
6. Ignoring Tax Implications: Some insurance claim payments may have tax consequences if not recorded correctly.
   • Solution: Consult with a tax professional to determine the tax treatment of your insurance proceeds. Ensure that your QuickBooks entries align with these recommendations to maintain compliance and avoid potential issues during tax filing.

How to Correct Duplicate Insurance Claim Payment Entries?

Here’s a step-by-step guide to help you identify and rectify these duplicates:

1. Identify Duplicate Entries:

• Run a Detailed Report:
  1. Navigate to Reports > Accountant & Taxes > Audit Trail.
  2. Set the date range encompassing the suspected duplicates.
  3. Review the report for identical transactions, focusing on date, amount, and payee.
• Use the Find Feature:
  1. Go to Edit > Find.
  2. In the Advanced tab, set criteria such as Amount and Memo to search for specific entries.
  3. Examine the search results for duplicates.

2. Verify Authenticity:

• Cross-Check with Bank Statements:
  1. Ensure each payment entry matches an actual transaction on your bank statement.
  2. Highlight entries in QuickBooks that don’t correspond to any bank transaction.
• Consult Insurance Documentation:
  1. Review insurance claim records to confirm the correct payment amounts and dates.
  2. Ensure that each claim is recorded only once in QuickBooks.

3. Remove Duplicate Entries:

• Backup Your Company File:
  1. Before making changes, go to File > Back Up Company > Create Local Backup to safeguard your data.
• Delete the Duplicate Transaction:
  1. Locate the duplicate entry in the appropriate account register or transaction list.
  2. Right-click on the transaction and select Delete.
  3. Confirm the deletion when prompted.

4. Reconcile Accounts:

• Access the Reconciliation Tool:
  1. Navigate to Banking > Reconcile.
  2. Choose the account associated with the insurance payments.
• Review and Adjust:
  1. Compare QuickBooks entries with your bank statement.
  2. Ensure all legitimate transactions are marked as cleared.
  3. If discrepancies persist, investigate and adjust as necessary.

How to Set Up Automated Reminders for Insurance Claim Payments in QuickBooks?

To ensure timely follow-up on insurance claim payments, configure automated reminders in QuickBooks:

• Step 1: Enable Payment Reminders
  1. Navigate to the Edit menu and select Preferences.
  2. Click on Payments in the left pane.
  3. Go to the Company Preferences tab.
  4. Check the box labeled “Do you want to send payment reminders?”
  5. Set your preferred reminder schedule and frequency.
  6. Click OK to save the settings.
• Step 2: Create a Reminder Schedule
  1. Go to the Customers menu and select Payment Reminders, then choose Schedule Payment Reminders.
  2. Click on New Schedule.
  3. Name the schedule (e.g., “Insurance Claim Follow-Up”).
  4. Define the customer group or criteria relevant to your insurance claims.
  5. Set the conditions for the reminder, such as the number of days before or after the due date.
  6. Customize the reminder message to suit your needs.
  7. Save the schedule.

For comprehensive instructions, consult QuickBooks’ guide on creating automated payment reminders.

What are the Best Practices for Managing Insurance Claim Payments in QuickBooks?

Managing insurance claims in QuickBooks involves a series of steps to accurately record and track transactions, ensuring your financial records reflect the impact of claims. Here are best practices to guide you through the process:

1. Set Up an Insurance Claims Account: Create a dedicated account to monitor all insurance-related transactions. This can be an income account for claim proceeds or an expense account for claim-related costs.
2. Record the Insurance Claim: When a claim is filed, document it in QuickBooks. Create a journal entry or use the “Other Income” category to log the expected claim amount, providing a clear record of anticipated funds.
3. Track Claim-Related Expenses: Document all expenses associated with the claim, such as repairs or replacements. Assign these costs to the insurance claims account to maintain an accurate expense record.
4. Record Claim Payments: Upon receiving payment from the insurance company, record it against the insurance claims account. This ensures your books reflect the income and offset any related expenses.
5. Reconcile Accounts Regularly: Regular reconciliation helps verify that all insurance claim transactions are accurately recorded and that your account balances are correct.
6. Maintain Detailed Documentation: Keep comprehensive records of all claim-related documents, including correspondence, invoices, and receipts. This supports your claims and provides necessary documentation for audits.
7. Consult with a Professional: Insurance claims can be complex. It’s advisable to consult with an accountant or financial advisor to ensure transactions are recorded correctly and comply with accounting standards.

By following these practices, you can effectively manage insurance claims in QuickBooks, ensuring your financial records are accurate and up-to-date.

Conclusion

Insurance claim payments are paid out once a claim has been verified, and they financially indemnify the insured for a loss that is covered under the policy. This payment is sometimes paid directly to a care provider (as with health insurance), but usually, it is sent to the insured in the form of a check. 

When you record insurance claim payments in QuickBooks, it removes old assets from your books, determines the profit or loss received from the insurance company, and perfectly holds any additional funds related to asset disposal.

Frequently Asked Questions!

How do I record a Property Insurance Claim in QuickBooks?

To record a property insurance claim in QuickBooks, follow these steps:

1. Record the Insurance Payment as Income:
   • Create a new Insurance Income Account in your Chart of Accounts to track the insurance payout specifically.
   • When you receive the insurance payment, record it as income, split between the properties if needed.
   • To do this, create a Sales Receipt or Deposit and categorize the payment under the new Insurance Income account. Make sure to allocate the amounts based on the properties involved.

2. Recording Repairs:
   • Roof Repairs: If the insurance claim is for a repair (like fixing a roof), record it as an Expense under the property’s expense account (e.g., Repairs and Maintenance). This expense doesn’t affect the value of the property itself.

3. Roof Replacement:
   • If the claim covers a roof replacement or another major improvement that increases the property’s value, it should be treated as a Fixed Asset.
   • Create a new Fixed Asset Account specifically for the roof or improvement and record the replacement cost there. 

What are Policy Payout Limits in Insurance Claims?

Policy payout limits define the maximum amount an insurer will reimburse for a covered loss, typically based on the property’s fair market value at the time of damage. A coinsurance clause may also affect payouts; if a policyholder insures less than a required minimum percentage of the asset’s value, the payout may be reduced proportionally.

Are Insurance Claim Payments Taxable in QuickBooks?

Insurance claim payments are generally not taxable in QuickBooks because they are considered reimbursements, not income. However, if the claim payment exceeds the adjusted basis of the damaged asset or if it includes lost income, that portion may be taxable.

To ensure accurate tax reporting:

• Categorize the payment under “Other Income” or a specific insurance proceeds account.
• If the claim is related to a business asset, adjust the asset’s book value accordingly.
• Consult a tax professional for guidance on taxable portions.

What Happens When There’s No Insurance Payout?

If a loss isn’t covered by insurance, it must be recorded without reimbursement. The business or individual will account for the damaged asset as a loss and remove it from their records, reflecting the full impact of the expense.

What if the claim payment only covers a portion of the expenses?

If the claim payment partially reimburses your expenses, you can record the insurance payment as partial income. Enter the full amount of the claim payment into the “Other Income” account as you would for any insurance claim. Then, record the remaining expenses that weren’t covered separately, so that only the reimbursed portion reflects as income. This allows you to account for out-of-pocket costs without over-reporting your income.

Is there a specific account I should use for insurance claim payments?

Yes, it’s recommended to use an “Other Income” account for insurance claim payments. This separates these funds from your normal operating income, keeping your financial reports more accurate. To create this account, go to your Chart of Accounts, select “New,” and then choose “Other Income” as the account type. Label it something like “Insurance Claim Income” for easy identification.

Disclaimer: The information outlined above for “How to Record Insurance Claim Payment in QuickBooks Desktop and Online?” is applicable to all supported versions, including QuickBooks Desktop Pro, Premier, Accountant, and Enterprise. It is designed to work with operating systems such as Windows 7, 10, and 11, as well as macOS.