Why homeowners insurance claims get denied
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Your home signifies an achievement that brings a sense of stability and security to your life. It’s also very likely your most expensive possession.
Occasionally, events occur that put your investment in financial jeopardy. That’s where homeowners insurance comes in – unless your claim is denied. A denial can leave you feeling confused and burdened with unexpected expenses. That's why understanding the reasons behind claim denials is important for all homeowners. This knowledge can help you avoid problems when filing your claim as well as work through what to do if your homeowners claim is denied.
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Understand why your homeowners insurance claim got denied
By understanding the potential reasons for claim denials, homeowners are empowered to take proactive measures to prevent issues and increase the chances of a successful claim. Here are some common reasons for denials that you might encounter.
- Filing error – Sometimes, homeowners' insurance claims are denied due to simple filing errors. These errors can include missing information, incomplete forms or submitting the claim to the wrong department. It's important to double-check all the necessary details and accurately complete the claim forms.
- Misread policy terms and exclusions – Misinterpreting policy terms or specific exclusions can create confusion about what is or isn’t covered. Carefully review your policy and get clarification from your insurance company or the VIU by HUB Advisory Team to prevent denials based on misunderstanding policy terms.
- Lapse in coverage due to nonpayment – Timely payment of premiums is important to maintain continuous coverage. Missing payments or renewals can cause you to lose coverage and, with it, the ability to file a claim. Continuous coverage is essential. Regularly paying premiums and renewing your policy on time helps avoid coverage gaps that could lead to claim denials.
- The event that caused damage isn't covered – Homeowners insurance policies typically have specific events or perils that they cover. If the damage or loss that you are claiming falls outside the coverage scope, the claim may be denied.
- Failure to file the claim soon enough – Insurance companies often require prompt reporting of claims. If you wait too long to notify your insurer of the damage or loss, it can be grounds for denial.
- Failure to make temporary repairs after damage – In some cases, you may be required to mitigate further damage by making temporary repairs such as boarding up windows or covering a leaky roof. Failure to do so may result in a denied claim.
- Insufficient documentation – Insufficient or incomplete documentation is a common reason for claim denials. Provide thorough documentation, including photos, receipts, estimates and detailed records to substantiate your claim.
- Damage considered normal wear and tear – Homeowners insurance typically covers sudden and accidental damages, not wear and tear or maintenance-related issues. If the damage is deemed to be a result of normal wear and tear, such as a leaking roof due to age, the claim may be denied.
- Negligence caused the damage or property loss – If the insurance company determines that negligence on the homeowner's part led to the damage or loss, the claim may be denied. Neglecting regular maintenance, failing to address pre-existing issues or not taking reasonable precautions can be grounds for claim denial.
- Insurance provider suspects fraud/false statements – Insurance companies thoroughly investigate claims, and if they suspect fraud or false statements, the claim can be denied. Providing accurate information throughout the claims process is essential to avoid denial based on suspicion of fraudulent activity.
Compare your policy to the denial
If your homeowners insurance denies a claim, it's important to take a moment and review your policy alongside the denial paperwork. This simple comparison can actually be quite beneficial. It helps you understand any coverage limitations, assess whether the denial is valid, seek clarification if needed, explore options for appeal and even consider if adjustments to your policy are necessary. By taking this step, you'll be more informed and ready to navigate the claims and appeals processes.
- Understand coverage limitations – Comparing your policy to the denial paperwork allows you to identify any specific policy limitations or exclusions that may have led to the denial. By gaining a clear understanding of what is covered and what is not, you can make informed decisions about your insurance coverage going forward and make disputes to the denial if necessary.
- Assess the validity of the denial – Reviewing the denial paperwork together with your policy will help you assess the legitimacy of the denial. Mistakes or misinterpretations can occur, and comparing the documents allows you to identify any discrepancies and take appropriate action. Consider these questions:
- Is a specific term in the policy in dispute
- Did the adjuster not have a complete understanding of your particular situation?
- Was there not sufficient evidence to back up the loss/damage?
- Seek clarification and guidance – If you have questions regarding the denial, comparing your policy to the denial paperwork may give you clarity. You can also request a detailed explanation of how the policy provisions were applied and how they relate to your specific claim to better understand the decision and potential avenues for appeal.
- Explore appeal or dispute options – If you believe the denial was unjustified or there are discrepancies between your policy and the denial paperwork, comparing the documents helps you assess your options for appealing or disputing the decision. It provides you with the necessary information to present a compelling case and potentially overturn the denial.
- Evaluate the need for policy adjustments – A denied homeowners insurance claim can show you areas where your coverage may be insufficient. If you discover gaps in coverage or exclusions that could impact future claims, it may be time to consider updating your policy.
What happens if your homeowners insurance claim is denied?
If, after comparing your policy to your denial paperwork, you feel that the denial was unjustified, you do have recourse. There are several steps you can take to address the situation and potentially overturn the decision. Here are some options to consider:
- File an appeal – The first course of action is to file an appeal with your insurance company. Review the denial letter carefully to understand the reasons provided. Collect any additional information or documentation that may support your claim and present a strong case for reconsideration. Be sure to follow the appeal process outlined by your insurance company and submit the necessary paperwork within the specified timeframe.
- File a formal complaint – If your appeal is unsuccessful and you believe that your claim has been mishandled, you can file a formal complaint. Contact the appropriate agency in your state to learn the complaint procedure and provide them with all relevant details, including copies of your policy, denial letter and any supporting evidence. A formal complaint can trigger an investigation into your claim and prompt the insurance company to reevaluate their decision.
- Consider an independent appraisal – In cases where the value of the damage or loss is in dispute, you can opt for an independent appraisal. Hiring a licensed and reputable appraiser who specializes in property damage can provide an unbiased assessment of the situation. This appraisal report can serve as additional evidence to support your claim and potentially sway the insurance company's decision.
- Consult a property insurance claims professional – Working with a property insurance claims professional, such as a public adjuster or an attorney specializing in insurance claims, may be wise. These professionals have experience with insurance companies and can provide insight into the claims process. They can review your policy, assess the denial and offer advice on how to proceed. Note that you will have to pay for these services and your deductible, so be certain that the potential benefit from a successful claim is worth the expense you’ll be paying.
Remember that every case is unique. The best course of action depends on the circumstances. You need to evaluate your options and choose the approach that is best for your specific situation. Stay persistent, document all communication and seek professional advice when necessary.
Does a denied home insurance claim count against you?
A denied home insurance claim typically doesn't affect your credit score, but multiple denials or a pattern of claims may raise concerns for insurers. Understanding the reasons for the denial will enable you to take steps to prevent future denials. Each insurance company has its own guidelines, so consider shopping around for coverage if you’re unhappy with your company’s rules surrounding denials and appeals.
No matter how many claims you’ve made or denials you’ve received, all homeowners need to know how they work. That knowledge will help you to file a claim in a way that minimizes your chances of having your homeowners claim denied and maximizes your chances of success if you do need to appeal a denial. The VIU by HUB Advisory Team is available to talk through your policy and evaluate it for areas that may need additional coverage. Being proactive about obtaining coverage can prevent problems and denials resulting from insufficient coverage.
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