The Most Common Reasons Why Insurance Claims Are Denied
Billions of dollars of insurance claims are denied in the United States every year. Insurance companies are for-profit corporations. If there’s a reason to deny your claim, then the insurance company will take advantage of that reason.
Insurance companies will deny your claim because of exclusions in your policy, for example. They might also deny your claim due to suspicion of fraud, non-payment of premiums, or a delay in filing the claim.
Why was your insurance claim denied? Are you worried about your next claim being denied?
We’re sharing the twelve most common reasons why property damage insurance claims are denied in the United States.
1. You Took Too Long to File the Claim
All insurance policies require you to file a claim in a “timely manner”. Some insurance policies have a specific limit: say, 30 to 60 days. Most policies use a general guideline of “timeliness”.
If you take too long to file your claim, your insurer could deny it.
2. You Didn’t Provide Enough Evidence
Insurance companies lose billions to fraud every year. To combat fraud, insurers require evidence. They might demand photos and videos of the damage, for example, or receipts proving the value of certain items.
In most cases, insurance companies are simply conducting due diligence. However, if your insurance company is making excessive demands for evidence, then they could be acting in bad faith. Consider hiring a public adjuster or insurance attorney.
3. You Didn’t Pay your Premiums
If you don’t pay your insurance premiums on time, or if you missed your latest premium payment, then your insurer could deny your claim. Home insurance companies are strict about timely payments.
4. You Didn’t Take Preventive Measures
Your insurance policy requires you to take preventive measures to avoid further damage after a loss. If a storm knocks a tree through your roof, for example, then you can’t simply leave a hole in your roof for a week and expect further damage to be claimed. You need to put a tarp over the roof or take basic steps to safeguard the scene. These “repairs” need to be temporary in nature so that the insurance company can see the actual damage when they arrive.
5. The Damage is Excluded
All insurance policies have exclusions. Most home insurance policies exclude flood damage, for example. Some have more unique exclusions – you can’t claim damage from nuclear fallout, for example.
If your property was damaged from an excluded event, then your claim will likely be denied.
However, insurance companies can also take advantage of policy exclusions. They might argue that the damage occurred due to an excluded event when most damage was not caused by that excluded event, for example. This is where insurance claims can get tricky. If you are dealing with a complicated insurance claim talk to a qualified and licensed public insurance adjuster for help.
6. The Damage Was Intentional
You can’t intentionally damage your property and expect your insurer to cover it. If your insurance company believes damage was intentional, negligent, or criminal, then your claim will likely be denied.
7. You Failed to Disclose Property Information to your Insurance Company
Insurance is all about risk. Insurers will analyze your home, assess your risk, and charge premiums based on that risk.
Maybe your home has outdated electrical wiring that hasn’t been upgraded since the 1950s. This significantly increases the risk of fire in your home, and your insurer needs to know about this risk.
If you failed to disclose certain information about your property, then your insurer could deny your claim. Make sure your insurer is aware of any underlying problems or risk factors in your property.
8. You Didn’t Tell Your Insurer About Other Property Changes – Like a Rental Unit
Many insurance claims are denied because the homeowner changed something significant about the property. The homeowner may have converted the basement into a rental unit, for example. Rental properties require different insurance than ordinary homes.
Other things that could impact risk include setting up a home daycare, buying a trampoline, renovating the basement or installing a pool. Your insurer needs to know about these changes. If your insurer doesn’t know about these changes, then your claim could be denied.
9. You Gave False Statements to the Insurance Company
You cannot make false statements to your insurance company or your adjuster and expect favorable outcomes. You might have a legitimate claim, but if you make false statements to your insurer about certain aspects of that claim, then it could be denied.
Tell the truth to your insurance company. Every insurance company has significant fraud prevention systems in place. The truth will usually come out eventually. Be sure to see tips for dealing with an insurance adjuster as well.
10. The Damage is Less Than Your Deductible
If your home has $1,500 of damage and your deductible is $2,000, then your claim won’t be denied, but you will not receive any payment. This is important as you are still required to make the repairs that were validated by your insurance company, even though the cost was below your deductible. Your policy won’t pay you if the deductible is high enough to cover the cost of repairs or replacement, but those repairs must still be made or your next claim could be denied for lack of maintenance to a known issue.
11. Your Policy Has a Cap
Many home insurance policies have a cap for the value of any single item. The insurance company will compensate you up to the cap – but it won’t exceed that cap.
Let’s say your $10,000 engagement ring is stolen. Your home insurance policy has a $5,000 cap or sub-limit for items such as jewelry. Your insurer will compensate you $5,000 for the loss of the engagement ring, but that’s it. You can purchase additional insurance for high dollar items to make sure that you are covered fully in case of a loss.
12. You Failed to Maintain Your Property
You are required to maintain your property and fix certain things. Wear and tear is an expected part of home ownership. Insurance covers unexpected expenses – not expected costs. The claim must be based of off a sudden and accidental occurrence, not an ongoing issue that you failed to correct in a timely manner.
Let’s say your roof is 30 years old. The shingles are falling apart. It needed to be replaced ten years ago. A storm blows parts of the roof off of your home, causing extensive damage to your interior. Your insurer may deny your claim because you failed to properly maintain your roof. The lack of roof maintenance contributed to the loss.
What Can I Do After My Claim is Denied?
Insurance companies rightfully deny thousands of claims every year. However, insurers may also wrongfully deny certain claims.
If your insurer denied your claim or offered too little compensation, then you can fight back.
First, contact your insurance company or insurance agent. Ask why the claim was denied. Ask if there’s anything you can do to fix the claim – like provide more evidence. Or, ask the insurer to review the claim.
The insurance company may have denied or reduced your claim because of any of the issues listed above. If none of these issues occurred, however, and you can prove it, then the insurer may reverse the denial.
In many cases, the insurance company’s decision is final. Your claim has been denied.
If you feel your claim was wrongfully denied, then you can move onto the next step: hiring a public adjuster. These insurance industry professionals represent you against your insurance company. They fight on your behalf for maximum compensation.
A good public adjuster can increase your insurance payout by up to 270%. In many cases, a public adjuster is the difference between having your claim denied or approved.
Final Tip For Dealing With A Denied Insurance Claim
Insurance companies will take any available reason to deny your claim. Remember: insurance companies are for-profit corporations. They’re concerned about their bottom line – they’re likely not concerned about your household finances.
If an insurance company has denied your claim, consider talking to a public adjuster for help.
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.
