Why Do Home Insurance Companies Deny Claims?

Many factors can lead to a claim denial, but keep in mind you can always appeal the insurance company’s decision.

Insurance companies can deny your claim for several reasons, like filing your claim too late or submitting an incomplete claim, but know that you can appeal your insurer’s decision.

Below, we’ll take a look at some common reasons home insurers deny claims, how to dispute a denial, and how to avoid having claims denied in the first place.

Why do insurance companies deny claims?

Insurers might deny your claim because your policy doesn’t cover the event that caused the damages or because you’ve submitted an incomplete claim. These are two of the most common reasons, but your insurer may deny a claim for various other reasons. Let’s take a more in-depth look.

Read More: How to Get the Most Out of Your Home Insurance Claim

Your policy doesn’t cover the event that caused damages or injury

Standard home insurance often covers damages caused by a wide range of events, such as volcanic eruptions, fires, and windstorms, but it doesn’t cover everything.

For instance, basic home insurance doesn’t cover earthquake damage. If you live in an earthquake-prone area and want to protect your property against this type of damage, you’ll need to purchase a separate earthquake policy or add an endorsement to your existing policy.

Standard homeowners policies also typically exclude flood damage. You’ll need to purchase a separate flood insurance policy from a private insurer or the National Flood Insurance Program (NFIP) if you want flood damage protection.^[1]

It’s also important to note that although home insurance usually helps cover medical bills for guests who accidentally hurt themselves on your property, it might not cover them in certain situations.

For example, say a guest injures themselves on a trampoline in your backyard. In that case, you could be liable for paying your guest’s medical bills out of your own pocket since most insurers don’t cover trampolines due to their liability risks.

You submitted an incomplete claim

Your claim may be denied if you don’t provide the insurer with enough evidence to support it. For example, if someone breaks into your home and steals your television, and you can’t provide the insurance company with a receipt proving you owned the TV, your insurer will likely deny your claim.

It’s important to document any damage before submitting a claim by taking photos and videos to share with your insurer. It’s also a good idea to keep an inventory of your personal belongings, including receipts and appraisals.

Check Out: Top 3 Most Common Home Insurance Claims Questions

Your home insurance policy lapsed

Late or missed payments can cause your home insurance policy to lapse, leaving you responsible for paying for any damages out of your own pocket.

To keep your policy active, be sure to pay your bill on time. Enrolling in autopay or paying for your policy in full up front can help you avoid missing payments.

You filed the claim too late

Home insurance companies often require you to file a claim within a certain time frame after your home is damaged. If you wait too long to file a home insurance claim, it might be denied, so make sure you know how long your policy allows for claim submission.

The damage is due to normal wear and tear

A standard home insurance policy doesn’t cover damage to your home that happens as a result of normal wear and tear over time.

For example, if your roof starts leaking and your insurer determines that the culprit is general wear and tear, it wouldn’t be liable for any damages to your roof. However, if you believe that the damage happened as a result of something other than wear and tear, you can dispute the decision.

Negligence caused the damage or injury 

An insurance company may decide to reject your claim if you or a member of your household commits a negligent act. For example, if you owned a dog with a history of aggressive behavior and allowed it to roam freely around your neighborhood, it would be considered gross negligence if it bit someone. Even though you would be liable, your insurer likely wouldn’t be required to cover this loss.

An insurer suspects fraud

An insurance company might deny a claim if it suspects insurance fraud. Some common examples of fraudulent acts include:

• Exaggerating the value of an item reported stolen

• Lying about when and where the property damage occurred

• Intentionally damaging your home

• Submitting fabricated evidence, such as fake receipts or repair bills

• Not disclosing that a residence is being used for rental or business use

• Asking a contractor to exaggerate the cost of repairs^[3]

You can contest the claim of fraud by gathering and submitting documentation, such as videos and photos of damages or a police report, that proves your claim is legitimate.

See Also: Homeowners Insurance Claims Statistics

What to do if your insurance company denies your claim

You can still appeal the decision if your home insurer denies your claim or you disagree with the settlement offer. Here are some steps you can take to dispute a claim denial:

• Find out why the claim was denied. After your claim is denied, your insurer should send you a letter stating why. Read this letter carefully to make sure your insurer is appropriately assessing your damages.

• Review your policy. Read your policy carefully to make sure the damages you’re filing a claim for are covered.

• Gather evidence. If you still believe your claim should be accepted, assemble evidence, such as receipts, photos, and police reports, that support your case.

• File an appeal. Send your insurer an appeal letter in writing explaining your case for why the damages should be covered, and attach the evidence you gathered to support your argument. The exact steps you should follow to submit an appeal should be outlined in your insurance policy.

• File a complaint with your state’s insurance department. If you’re unable to resolve the claims dispute, you can file a complaint with your state’s insurance department.

• Get professional help. If taking the steps mentioned above doesn’t help you resolve your complaint, and you want to pursue the issue further, you can consult a lawyer.^[4]

Check Out: Can I Cancel a Home Insurance Claim?

What do you do if you believe your home insurance company is acting in bad faith?

If you think your insurer is handling your claim in bad faith — not performing a thorough investigation or trying to settle for an unreasonably low amount, for example — consider filing a complaint with your state’s insurance department as soon as possible.

Your state’s insurance department might be able to resolve your dispute with the insurer by helping you get a higher claim payout or refund. You can also choose to file a lawsuit against your insurance company. If you need help filing one, consider hiring an insurance attorney.

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