Homeowners insurance protects your house against things like damage after a major storm, a kitchen fire and even theft. After something happens, you file a claim with the insurance company and expect to get reimbursed based on your policy’s limits. But what happens when your claim settlement isn’t what you expected or it’s denied altogether?
Read on to learn what to do if your insurance denies a claim.
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Why can insurance claims be rejected?
Unfortunately, it’s not uncommon for home insurance claims to get rejected. There are a number of reasons why the insurance company might not approve a claim you think is covered. Here are some of the most frequent reasons why an insurer won’t reimburse you:
- The damage isn’t covered
The most common reason why insurance claims get denied is because the damage isn’t actually covered under your policy. For example, you might think that a major crack in your home’s foundation is covered because it’s a hazard, but that would be considered wear and tear, which isn’t covered by insurance. That’s why it’s crucial for homeowners to be familiar with their policy and understand what is and is not covered before submitting a claim.
- The damage wasn’t correctly reported
Another common reason why claims get denied is because the homeowner doesn’t report their claim correctly. For example, your roof gets damaged during a windy day and you file a claim without disclosing that the roof is 40 years old. Because you failed to disclose the truth about your roof the claim would be denied when the adjuster came to do the inspection and determined how old your roof was. Even though the damage occurred from a covered peril, your roof insurance claim might get denied because you neglected to replace your roof. Remember that insurance usually only covers sudden and accidental damage.
- The cost of damage is less than your deductible
Although your insurance company will help you pay for certain damages, they still want you to pay for a portion of your settlement. If your deductible is less than the cost of your claim payout, you probably won’t get approved. For instance, say you file a claim for water damage, and the cost of repairs would be $400. If your deductible is $500, you would be covering the $400 cost out-of-pocket anyway. Therefore, it doesn’t make sense for the insurance company to give you any additional money.
How to dispute your home insurance claim settlement
If you believe that your claim should have been approved, or you should have received a higher payout, you can dispute the insurance claim result. Many people choose to fight the dispute themselves because hiring legal professionals can be costly. Here are the steps you should take to dispute a settlement claim yourself.
- Understand your policy
If you intend to dispute your claim, the first thing you should do is closely review your insurance policy. It’s possible that your claim was denied because you thought something was covered when it actually wasn’t. If you realize that you filed a claim for something that wasn’t covered in the first place, it will save you a lot of extra work.
It’s also important to make sure you understand what type of policy you have—named peril or open peril—and double check what is and isn’t covered. An open peril policy provides coverage for anything that happens that is not specifically excluded in your policy. A named peril policy only covers the things specifically listed in your policy. Also check your coverage limits and take note of any endorsements that might bump up the amount of coverage you’re entitled to.
- Review the claim
If your claim is denied, the insurance company should provide documentation explaining why it was not approved. Review the documentation and make sure you understand the insurance company’s reasoning, even if you think it’s wrong. If the reasoning isn’t immediately clear, don’t be afraid to meet with an agent and ask questions. Make sure to keep track of everyone you talked to, when you talked to them and the outcome of the conversation.
Once you’ve reviewed the claim, start putting together documents that prove why you believe you’re entitled to the claim settlement. For example, if the insurance company denied your claim because they thought it would cost less money to repair your home than what a contractor quoted, make sure you have written proof of that.
- Write a letter
Next, you’ll need to write a letter to the insurance company’s claims adjuster stating your intent to dispute the claim. It’s usually best to submit the appeal as a hardcopy letter via mail, rather than in an email. In the letter, explain why you think the claim should have been approved, and include any evidence that suggests the claim was mishandled. Even if you’re angry, use polite language and don’t threaten a lawsuit.
Request that the claims adjuster review the claim and provide a response within a specific timeframe. Keep a copy of the letter for your own records and also send a second version to your adjuster’s supervisor so there are multiple copies in circulation.
- Get a second inspection
If you initially filed a claim for damage, the insurance company likely sent an adjuster to evaluate the extent of the damage. But insurance claims can be subjective. One adjuster might view certain damages as minor, while others will see the damage as more extensive.
If the insurance company denies your claim because they think the damage is too minimal, you can request that the company send an additional adjuster for a new inspection. It doesn’t mean they’ll come to a different conclusion, but having a second set of eyes can work in your favor. If a contractor, technician or other independent professional examined your house, you can opt to have those people meet with your adjuster during the inspection.
- File a complaint
If all else fails and the adjuster won’t change their mind, the last resort option is to submit a formal complaint to your state’s department of insurance. If you can convince the department that your claim is legitimate, it can give you leverage with your insurance company.
However, filing a complaint doesn’t guarantee that you’ll get support from the state. It’s not their sole job to resolve disputes between policyholders and their insurance companies. If it is determined that your claim should have been approved, the department of insurance can help you get the payout you deserve, if they have the resources.
It can be incredibly frustrating to have a claim get denied by your insurance company. But if you read your insurance policy carefully and understand what is and isn’t covered, it can save you from rejected claims in the future. If you’re not comfortable disputing a claim on your own, you can always hire a legal professional to do it for you, but it can come at a high cost.