Why Do Insurance Companies Deny Claims?

Being involved in a loss is no fun for anyone involved. It’s stressful, it can be costly, and it can interrupt your way of life. All in all, we’re glad that we have insurance in these moments.

Or – we thought we did. Imagine your basement flooded overnight, and you submitted a claim to your insurer, only to have that claim denied. Now, you’re facing thousands of dollars’ worth of water damage on your own. Why did your insurance company deny your claim?

Claims are denied for various reasons. Recovering compensation isn’t always straightforward (as much as we wished it was!)

Having knowledge is power and being informed about what your insurance policy does and does not cover can save you from winding up in a sticky situation where a claim you submitted was denied and having to pay for the incident out-of-pocket. Let’s go over some of the most common reasons why insurance companies deny claims.

Here are some of the main reasons why insurance companies might deny your claims

Even if your claim was seemingly legitimate, it was denied. Why? You’re already stressed enough about the damages, and now you must deal with it completely by yourself.

It’s important to look at why insurance companies might deny claims so you can understand how best to avoid a situation like this in the future. Ultimately, Excalibur Insurance’s Defenders will do whatever we can to negotiate on your behalf, so you get your fair settlement, but we also believe in the importance of understanding the situations as listed:

Contested Cause of Loss

Having evidence and documentation of every loss is crucial. For example, if your home was burned down in a fire, taking images, providing receipts of possessions that were lost, pictures, and more can all be helpful in establishing what was lost. If the cause of the loss is contested, or if there isn’t substantial proof as to the cause of the loss, companies could refuse to approve your claim.

Situations like these are rare, but it’s still always important to provide clear evidence to link what was lost to the accident.

Dispute to Fault/Liability

In some cases, claims can be denied if there’s ever a dispute to fault/liability. If there isn’t clear enough evidence to establish liability, a claim could be denied.

This is why it’s so important to have documentation for losses. Ask for a copy of your police report following a car accident. Bring on any eyewitnesses that you can. The clearer the evidence you can provide, the simpler the claims process, and the less likely your claim will be denied.

Failure to File in Time

Every insurance company has a specific duration of time during which you can submit a claim. If the loss occurred two years ago and you’re only filing a claim for it now, odds are that your claim will not be accepted. Companies may have varying periods of time when they’ll accept claims, and if you are unfamiliar with the time limit that your provider has posted, be sure to call and ask.

The best thing you can do to avoid a claim being denied due to failing to file it in time is to act as quickly as possible following a loss. This will also ensure you can get your settlement quickly, begin repairs, and get back to life as it was pre-loss.

Lapsed Coverage

If your coverage has lapsed, your insurance company has every right to deny your claim. Insurance coverage can lap for many reasons, such as failing to make payments on time, having an insurer cancel your policy (they’ll warn you in advance if this ends up being the case), or if the insurance company ceases to exist altogether.

Try to maintain a continuous insurance history to avoid lapses in coverage. Not only will lapses in coverage raise your rates when you try to get insured again, but any claims you make during a period of lapsed coverage will be denied. If you are cancelled, try to get insured again ASAP.

Not Having Valid Coverage

Particularly in the case first mentioned with water damage, your claim can be denied if you don’t have valid insurance. Water damage is seldom covered by standard home insurance unless you have an endorsement for overland water or sewer backup, so if you have not purchased these endorsements, then no such coverage exists, and your claim will be denied.

This is why it’s so important to familiarize yourself with your coverage. If something you think you need coverage for isn’t listed, discuss with your broker about optional endorsements to enhance your protection.

Final thoughts

Insurance companies aren’t out to get you. They’re not greedy, and they’re not trying to land you worse than you were pre-loss. Insurance companies do, however, reserve the right to deny you if you submit a claim for something that isn’t covered by your policy. If no valid coverage exists, it’s pretty unlikely you’ll strong arm your insurance provider into paying your settlement.

There are a lot of circumstances where an insurance company can reserve the right to deny a claim. Our job here at Excalibur Insurance is to negotiate on your behalf so that you can get the settlement you deserve, and we’ll do our best to make sure you never wind up in a situation where you feel a claim has been wrongly denied. At the same time, we strongly recommend you file an appeal to your insurance company if you believe a claim has been denied when you were entitled to compensation. If you have any questions about how to do this, give us a call.