Why Your Car Insurance Claim Was Denied & How to Appeal
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When you buy auto insurance, you hope you’ll never get into an accident and need to submit a claim. But if you do have to file one, you expect your policy to pay in full.
Unfortunately, insurance companies can — and do — deny policyholders’ claims on occasion. Some of the most common reasons for claim denials are exceeding the policy limit, lacking the needed coverage and breaking the law. Additionally, sometimes claims are incorrectly denied. Learn what you can do to resolve a claims dispute.
Why claims are denied
Claims adjusters, the people who investigate insurance claims for a living, say these are the most common justifications insurers use to deny a claim or pay less than the full amount.
Policy limits: Every policy has limits on how much it will pay in the event of an accident, and if your claim is greater than your coverage limits, you could be stuck with the excess.
For example, the limit on your property damage liability coverage, which pays if you damage someone else’s car or other property, might be $10,000. That could be adequate in some instances but a problem if you rear-end a $400,000 Lamborghini.
Although each state sets minimum liability coverage, such as $10,000 or $25,000, you can choose to pay extra for a higher limit.
Policy coverage: An auto policy consists of several kinds of coverage. Among them are property damage liability, which covers damage to someone else's car or property; collision coverage, which pays for damage if you’re in a collision with another car or hit an object, like a light pole; and comprehensive coverage, which covers damage from other causes, such as fire or vandalism. Some coverage may be mandated by your state, but other types could be optional.
In most states, limited liability coverage is required, but it will not cover you in every circumstance, like if your car is stolen.
Breaking the law: Even if you have the right kinds of coverage, in adequate amounts, your insurer can deny your claim if you were in violation of state law when the accident happened. One example of that would be driving without a valid license. Another is if you were driving while intoxicated.
Additional reasons: An insurer can also deny a claim on the grounds that the accident was avoidable on your part or if they believe your claim is fraudulent. Among the red flags that insurers routinely watch for are:
- Not reporting an accident immediately to the police or your insurer
- Not seeking medical attention, if any is needed, immediately after the accident. That can lead to suspicions that you are filing a claim for injuries that weren't the result of the accident.
- Providing false information back when you purchased the insurance — which the insurer might uncover in the course of investigating your claim
Resolving a claims dispute
If you feel your claim was wrongly denied or that you were inadequately compensated, contact your state's insurance department. Ask how to submit a complaint and what to do next.
Auto insurance is regulated on the state level, and many states have a special unit set up to deal with these kinds of policyholder issues. For example, if you live in California, the Department of Insurance's Automobile Claims Mediation Program will help you negotiate a disputed claim with your auto insurance company under many circumstances.
If all else fails, and a large enough amount of money is at stake, consider hiring an attorney to represent you in a claims dispute.
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