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Why Insurance Claims Are Denied, And How To Prevent That From Happening

Friday, March 5, 2021

Insurance claim denial

Discovering an insurance claim is denied is frustrating and time-consuming. Most of us purchase insurance premiums and expect full coverage for all accidents and incidents. There are many reasons an insurance claim can be denied. We recommend taking a few extra minutes to review the following common issues across all types of insurance.

Top Reasons Why Insurance Claims Are Denied

Due diligence in reviewing your various insurance documents’ fine print can go a long way in keeping yourself informed about your coverages and limits. There are common issues related to claim denials, whether homeowners, auto, commercial, or life insurance. Most denials are because premiums have not been paid. You may have automatic payments set up for your various policies, but always review your bank statements to ensure the installments are current. Suppose you are denied a claim due to non-payment. In that case, you will have the advantage of knowing your bank account reflects those monthly drafts, which gives you the power to refute the allegation.

Why Do Insurance Companies Deny Claims?

Insurance companies are in the business of making money. The profit model expects the larger majority of people will never need to make a claim. When a policyholder files a claim, the insurance company will investigate the validity based on the contract terms. When not every detail meets the criteria for settling the request, they have the right to deny payment.

Typical Factors For Claim Denials By Type Of Insurance:

Auto Insurance:

  • Missed or late premiums
  • Being underinsured
  • Delay in reporting an accident
  • Uninsured driver

Being a safe driver and paying your bills on time is an excellent way to avoid having to make an auto insurance claim. If you are involved in an accident, make sure you follow the guidelines for exchanging information with any other drivers and report the accident to the authorities.

Homeowner’s Insurance

  • Unpaid premiums
  • Missed reporting deadlines
  • Fraud
  • Underinsured
  • Exclusion clause
  • Deductible exceeds claim

Your homeowner’s policy has coverage limits. Taking the time to review the details will make it much easier to understand if the damage you have sustained is covered. Discuss with your agent how to best protect your property for all perils, and be sure to notify all necessary parties when you need to make a claim.

Life Insurance:

  • Unpaid premiums
  • Fraudulent information
  • Death occurs before the policy is in effect
  • The beneficiary is charged with murder
  • A suicide that occurs within the first two years of the policy

Life insurance policies require an understanding of the fine print and details. Take the time to work with your insurance agent to ensure your beneficiaries are supported as you intend.

Commercial Insurance:

  • Fraudulent claims
  • Out-of-date details
  • False business description
  • Underinsured for added equipment
  • Failure to file a police report
  • Insufficient record keeping/missing information

Business insurance requires detailed information for adequate coverage. Failure to inform your agent of equipment upgrades and additions to your property will cause you to be underinsured. Commercial protection is dependent on excellent record keeping, adherence to laws, transparency in all your business practices, and a good working relationship with your insurance agent.

The best way to avoid a claim denial is to be prepared and have excellent insurance protection. Your local Independent Insurance Associates agent is well versed in providing you with the insurance coverage you need. Whether it is homeowners, auto, life, or commercial insurance, we are here to offer you the best policy for your unique situation. Contact us today if you have questions or wish to schedule a review of your existing policies.