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When an insurer denies a claim, it may be possible to appeal the denial or even file a lawsuit. Read on to learn what else you can do about a claim denial.
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Insurance is supposed to provide important protection for accidents. For example, when a driver purchases auto insurance, they do so in order to make sure their car can be replaced after a crash and that their insurer will pay damages if they harm others.
In some cases, however, insurance companies do not pay out when something goes wrong. Instead, an insurer may end up denying a claim. If that’s the case, here’s what happens next.
Consumers can take action for wrongful denials
Insurers have an obligation to pay under certain circumstances. So, if they wrongfully deny a claim, consumers have some options.
If a person makes a claim with their insurance and the claim is denied improperly, they may be able to file a bad faith claim against an insurer. This would require the policyholder to show the insurer acted unreasonably and without justification to deny payment of a valid claim. Some common examples of bad faith include:
Improperly denying a claim without any valid justification to say the loss wasn’t covered.Providing a low payout offer and trying to pay far less than the claim was worth.Delaying a decision on a claim for a long period of time, often to try to force the insured person to settle for less than the claim should be worth.
It can take a lot of effort to file a bad faith claim against an insurer, and it usually will mean hiring a lawyer to offer assistance. But, it can also be worth it if an insurer has tried to deny a policyholder coverage that they paid for — and coverage they need when a covered disaster happens.
The good news is, attorneys usually take bad faith claims on a contingent fee basis. This means a policyholder who needs to get legal help will not have to pay out of pocket for attorney fees unless they win their case.
Of course, a bad faith claim should still be a last resort. After a denial, insured policyholders should talk with their insurer to find out about the appeals process and should exhaust their options in trying to appeal the denial before calling a lawyer — unless the insurer is delaying unreasonably and it’s clear there will be no help provided without legal assistance.
Consumers may be left paying out of pocket when a claim was denied for legitimate reasons
Unfortunately, there are some circumstances where insurers do not act improperly when denying a claim. There are times when a loss simply will not be covered based on the terms of the policy. For example, this could happen if someone with only liability insurance had their car stolen. They would have no coverage for the theft without comprehensive insurance coverage.
When a claim is legitimately denied, the person who suffered the loss will likely have to cover it out of their own pocket. This is why it is so important to review insurance policies and make sure that comprehensive coverage is in place in order to avoid financial devastation.
By making sure to have a comprehensive policy in place and by choosing an insurer with a good track record of paying covered claims promptly and appropriately, ideally policyholders can avoid the hassle and financial stress that can come with a denied claim.
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