Home > Home Insurance > What To Do When Your Home Insurance Claim Is Denied

What To Do When Your Home Insurance Claim Is Denied

Updated Nov 17, 2022

Updated Nov 17, 2022

Home > Home Insurance > What To Do When Your Home Insurance Claim Is Denied

Homeowners insurance policies provide an invaluable financial safety net that protects you during a disaster. When experiencing property damage or becoming a victim of theft, homeowners insurance helps you recoup your losses.

While these policies can be lifesavers, the process of submitting a claim, the following appraisal, and dispensing of financial compensation can be flawed. Documents can be submitted incorrectly, information can be lost in the shuffle, and occasionally, companies will fraudulently deny claims. When these situations arise, as a homeowner, you should be aware of your rights and prepared to take the necessary steps. This article will cover why claims are denied and the appropriate steps to take afterward.

What Are the Causes for Insurance Claim Denial?

insurance claim inspector on the job
Image Source: Canva

Insurance claims can be denied for many reasons, such as misfilings, clerical errors, missing deadlines, or fraud. To understand how best to respond to a claim denial, you’ll first need to know why your claim was denied. 

Poor or Insufficient Documentation

Insufficient documentation in the claim process is one of the most common and correctable reasons for a denial or undervaluation. When filing a claim, you’re expected to provide evidence of how the damage occurred, along with receipts for any at-purchase, current, or estimated value of lost items. Failure to provide this information can result in the denial of your claim. Keeping a strict record of receipts for high-value home items, typically as part of a home inventory, is essential when filing claims for homeowners insurance.

Damage Not Covered by the Policy

Another common cause for a claim denial is when your insurance coverage doesn’t include the cause of the damage (referred to as a peril). Each policy has numerous perils which are specifically not covered, called exclusions. Before filing a claim, you should always ensure the damage or loss you’ve experienced is included in your policy. You can ask your insurance agent if you’re unsure what your policy excludes. Some of the most common peril exclusions include the following:

  • Earth movement: This includes earthquakes, sinkholes, landslides, and erosion.
  • Flooding from external sources: Water damage caused by weather, natural disasters, sump pump or sewer line backups, mudslides, storm surges, and seeping from groundwater.
  • Pest infestations: These are considered preventable hazards and are typically not covered. A pest infestation can include critters like termites, rats, bees, bed bugs, etc.
  • Military hazards: Property loss due to military activity and the effects of war are not covered, including nuclear radiation.
  • Poor maintenance or failure to upkeep: One of the most common causes of property insurance claim denial is lack of maintenance and upkeep. Homeowners are expected to take reasonable actions to prevent foreseeable damage or breakdown of covered items. Insurance will not cover any obviously preventable damage or damage due to a problem homeowners neglected to fix. Furthermore, homeowners insurance does not cover routine maintenance or general wear and tear, but a home warranty can.

Filing Deadlines

Homeowners have a set amount of time to file a claim after the event of disaster or theft. These filing deadlines are strictly enforced. If you miss your deadline for filing, you may be denied coverage. If you need an extension or have extenuating circumstances preventing filing, such as displacement, you must notify your insurance agent immediately.

Failure To Pay the Premium

To be eligible for coverage, you must be current in paying your premiums and in good standing with your insurance company. If you fall behind to the point of potential cancellation of coverage, your insurance company must notify you in writing. These notifications should include deadlines for repayment and the cost of any associated reinstatement fees.

Adjuster Fault or Clerical Error

While uncommon, errors or bad faith appraisals can happen on the part of the adjusting agent or insurance carrier. The most common form of this is a misrepresentation of the cause of damage. When receiving your denial letter, ensure the reason for denial aligns with the cause of damage. Remember that when filing or reporting documentation, take pictures and provide as much verifiable information as possible. Doing so reduces the chance of inaccurate representation and reporting of damage.

Damage To Undocumented Improvements

If you make a major home improvement, such as installing solar panels, remodeling, or adding a structure, failure to report it could result in a lack of coverage. When making major improvements or repairs to your home, immediately notify your insurance agent, along with appropriate receipts or invoices detailing the total cost.

What To Do When a Homeowners Insurance Claim Is Denied

filing an insurance claim form
Image Source: Canva

The first step you need to take when facing a denied or undervalued claim is gathering as much information as possible. Insurance companies are required by law to provide the reason for claim denial in writing through a physical letter.

Review the Denial Letter

When receiving a claim denial letter, you should thoroughly review it. Compare the reasons for the claim denial with the outlined coverage of your policy, claim, and provided evidence. If the denial was based on incorrect information, a lack of documentation, or correctable errors, you should contact your insurance agent, claims adjuster, or the company’s claims management department.

If the information within the letter aligns with your claim, but you still feel that your losses should be covered, there are some steps you can take to contest the decision.

Speak to an Agent, Correct Errors, and Appeal

If there are obvious errors in the denial, such as damage caused by the incorrect source, you should immediately contact your insurance agent. You’ll likely be directed to your company’s claims department and asked to refile or submit new evidence for review and appeal. Once the appeal has been processed, a second inspection may be required. This step allows the insurance company to correct any errors that may have occurred during filing and for you to submit any evidence that may support your case. Remember that even if your case is reviewed, the claim status may not change, and you can still be denied coverage.

Hire a Public Insurance Adjuster

If the information filled is correct, but you still believe your claim was undervalued or incorrectly denied, your next step is to hire an independent claims adjuster. Public adjusters are trained and certified insurance professionals who specialize in managing, filing, and settling insurance claims. When hiring an adjuster, they’ll typically:

  • Analyze your policy
  • Review your case
  • Offer an independent appraisal
  • Help you collect the necessary documentation and gather evidence
  • File your appeal or dispute your claim.

Public claims adjusters usually offer free consultation and will cost you between 5% to 20% of the payout of your claim. When using a claim adjuster, you’ll be able to discover if your claim has been wrongfully denied or if the amount offered has been undervalued. They can also determine if your claim has been correctly denied or if the value is accurate, potentially saving you costly attorney fees.

File a Formal Complaint and Take Legal Action

The final step you can take when disputing a claim is reporting your insurance provider to your state’s insurance department and then hiring an attorney. Each state has a department of insurance that oversees the regulations of insurance agencies operating in that state. You can file complaints to these departments against insurance companies and even specific agents in that company.

You can also hire a lawyer to fight for a claim settlement. Hiring a lawyer for insurance claims can be costly and time-consuming, with no guarantees for success or a settlement offer. We recommend only using this as a last resort after consulting a public adjuster and reporting to your state insurance department.

Closing Thoughts

There are plenty of reasons a claim is denied or undervalued. Often this results from improper documentation, misreading policy terms, or lack of coverage. However, sometimes mistakes are made, and companies can act fraudulently. In these situations, you have multiple options for remediating the situation, including appeals, third-party adjusters, and even legal counsel.

Other Home Insurance Resources