How to Handle Underpaid Insurance Claims

There are plenty of signs your insurer underpaid your insurance claim – like suspiciously low estimates, missed damage, or poor communication from your insurance company overall.

Fortunately, you have options. You can fight back against an underpaid insurance claim, potentially receiving thousands more dollars to repair after a covered loss.

Keep reading to find out everything you need to know about responding to an underpaid insurance claim.

Review the Reason for the Underpayment

Insurance companies are allowed to deny or reduce your settlement based on the terms of your insurance contract. Review these terms to understand the reason for the underpayment.

Some of the reasons an insurer could deny or reduce your claim include:

• Did the insurance company account for depreciation? Depreciation can reduce your claim by thousands. The $3,000 TV you purchased five years ago isn’t worth $3,000 today. Sometimes this depreciation is recoverable and sometimes it isn’t. This depends on your policy language.
• Do you have a replacement cost or actual cash value policy? A replacement cost policy compensates you based on the amount of money it would cost to replace your damaged item with a similar item today, while an actual cash value policy compensates you for the value of the item you lost, minus depreciation based on the age and condition of the item.
• Was some of the damage caused by wear and tear or lack of maintenance? As a homeowner, you have an obligation to maintain your property, and failing to maintain your property can lead to a denied or reduced insurance claim. If this is the case, it is often confusing to determine where the new damage is compared to the existing damage.
• Was damage caused by an excluded event? Homeowners insurance policies cover water damage from burst pipes but not flood damage, for example. Some policies cover water damage but not wind driven rain. This is explained in your policy language.
• Do you understand your insurance policy and what it covers? Many homeowners don’t truly understand their insurance policy – including limits and exclusions – until after a loss when it’s too late. Even your adjuster might not understand your policy fully as it is often over 80 pages and the language of your policy changes based on your endorsements.
• Did the insurer cite a specific reason for the denied or reduced insurance claim? Honest insurers provide a complete explanation of the reason for their decision. They will normally do this in a letter that quotes your policy language, but it doesn’t mean they are always correct.

Based on your answers to these questions, you might have a valid reason to challenge your insurer’s decision.

Is Your Insurer Acting in Bad Faith?

Sometimes, insurance companies that are underpaying a claim are caught acting in bad faith.

Per state insurance laws, insurers must act in good faith. They must process claims in a timely manner, respond to homeowners, and treat homeowners fairly throughout the process.

Some of the signs your insurer is acting in bad faith include:

Bad Faith Sign #1: Failing to Investigate Claim Thoroughly: Bad faith insurers may try to close your claim as quickly and cheaply as possible without proper investigation. They may quickly review your claim, then offer a payout before further damage is discovered.

Bad Faith Sign #2: Poor Communication: Does your insurer take a long time to respond? Does your insurer ignore questions? Insurers that act in bad faith typically have poor communication. They may want to draw out the process to frustrate or wear down homeowners, hoping they accept a lower settlement offer.

Bad Faith Sign #3: Demanding Excessive Evidence: Some insurers demand excessive amounts of evidence to justify your claim. Your insurer could be looking for a reason to deny your claim. Or, they could simply be trying to push you to a point of caving in.

If you believe your insurer is acting in bad faith, then it’s important to fight back. Insurers can face huge legal consequences for acting in bad faith, and it’s important to hold insurers accountable – and receive the money rightfully owed to you.

How to Respond to an Underpaid Claim: Step-by-Step Guide

If you believe your insurer wrongfully underpaid your claim or acted in bad faith with your insurance claim, then there are steps you can take to fight back:

1. Ask your Insurer to Review Your Claim
   If you have reviewed your claim and your insurance policy and believe your insurer has mistakenly underpaid your claim, then ask your insurer to review it. All insurance companies have a review or dispute process. Sometimes, the insurer assigns a new adjuster to look over your claim. In other cases, you submit new evidence that changes the way an insurer feels about your claim. The insurer could review the claim and rule in your favor. Or, you might move onto the next step.
2. Hire a Public Adjuster for an Independent Appraisal
   Your insurance company’s adjuster represents your insurer’s bottom line. Throughout the claim, you may not have anybody on your side – until you hire a public adjuster. Public adjusters are insurance industry professionals with proven experience navigating complicated claims, overturning denied claims, and securing more compensation for policyholders.

A public adjuster can:

• Evaluate your claim and assess the damage to determine what you are rightfully owed.
• Organize evidence and present it to your insurer in the best way possible to get the claim approved.
• Negotiate with the insurer on your behalf to obtain the highest possible settlement.

Overall, the public adjuster’s goal is to help you get the exact amount of money for your insurance claim as you are rightfully owed.

In many cases, a public adjuster can help double or even triple the amount of money initially offered by the insurance company, making them a worthwhile investment – particularly when the disputed amount is over $10,000.

You Can Fight Back Against An Underpaid Home Insurance Claim

You buy home insurance to protect against unexpected events, and you expect to be properly compensated when an unexpected event occurs.

Unfortunately, insurers often want to minimize the settlement amounts paid for covered claims. That’s why many deliberately underpay claims.

By fighting back, you can receive the compensation you are rightfully owed based on the terms of your insurance contract.

Sit down for a free consultation with a ClaimsMate public adjuster to get professional help with your underpaid insurance claim.

Stephanie Corona

Stephanie is a property insurance claim expert with over 20 years of experience working as an insurance adjuster, expert witness, appraiser and umpire. She is passionate about sharing her expertise, knowledge, tips and training to help both property owners and Public Adjusters in their pursuit of effectively managing claims and recovering the claim settlement they deserve after a loss.