What do you do when an insurance company denies a claim and doesn’t pay? This is the question on the minds of most insurance policy holders. Only few things could be costlier, more frustrating, more unsettling, and more disappointing than receiving a letter from your insurance company that your claim has been denied. This will no doubt add even more worries to the ones you are having already—as a result of what necessitated the claim in the first claim (illness, disaster, etc).
Denied claims could make your life more complicated, especially when you don’t have the cash to pay for the repairs on your own. But having your claim denied doesn’t necessarily mean you have lost out. If you are not satisfied with an insurance denial, you don’t have to accept that as a final judgment. The fact that your claim was denied should be the starting point, not the ending point. So, don’t start thinking of ways you can live with your worries just yet. There may still be hope.
Remember that the insurance company is a business, just like any other business out there. They don’t like to give out money if they don’t have to or when they are in doubt. But this does not mean they are dishonest; they are only trying to be careful to avoid being gamed. This is probably the reason your claim was denied. Now, here are the steps to take when an insurance company denies your claim.
What to Do When an Insurance Company Denies a Claim and Doesn’t Pay
1. Find out why your claim was denied
Understanding the reason your insurance claim was denied will help you properly determine whether you have good reasons to appeal the judgment or not. The following are common reasons why insurance claims are denied:
- Your insurance policy does not cover the claim presented. For example, if you drive an old vehicle, your may be carrying a liability insurance that does not cover collision or crash claims. In this example, your insurance is denied correctly.
- You do not qualify as a named insurer under the policy. For example, if you are a teenager and your parents have specifically excluded you under their policy because they don’t expect you to drive their vehicle.
- The amount of damage claimed exceeds the limits of your policy as stated on your declarations page, which means the insurance company will not cover the excess.
- You failed to pay your premium before the end of the grace period, and so your insurance coverage has lapsed.
- The property you are making the claim for is not recognized by the insurance company and is therefore not covered in your policy. For example, you have a car insurance policy for your old car, but did not notify the insurance company when you bought a new one, so that they can add it to the policy. In this case, you will have your claim denied if your new car gets damaged and you need funds to repair it. And the coverage for the old car won’t transfer to the new one.
If your insurance claim was denied due to any of these reasons, then you will have to accept the judgment, as you have no reason to take further action. However, if you still believe your insurance claim was denied incorrectly after reading the insurance company’s reasons and reviewing your policy, you can go ahead to appeal the denial.
2. Dispute the wrongful insurance denial
If the stated reason for the denial of your insurance claim does not reflect the actual facts of your claim, or the reasons don’t hold water (by your own judgment), you have a right to dispute or appeal the denial. Here are the things you should do in this case:
- Stay calm and be positive. This will make the process go more smoothly and could result in a beneficial outcome on your behalf.
- Write the insurance company and state how and where you think they went wrong. (Be confident. The company is made of and run by humans, so they can make mistakes). Provide enough documentation to support your response. If they agree to their fault, they will negotiate with you and give you a fair settlement.
- Be persistent. Don’t get frustrated to the point of giving up if your calls are not answered or your appeal isn’t responded to. You can visit the company to have a one-on-one conversation with them.
- If the company hold on to their decision and you also hold firm that you are entitled to your claim, then you can report the company to the State Insurance Commissioner or any local regulatory agency for insurance companies.
- File a lawsuit against the company for bad faith insurance practices, breach of contract, or violations of your state’s insurance code. This option should only come as a last resort.