Sometimes insurance companies deny claims for legitimate reasons and can be a symptom of a policy holder breaching terms or not understanding the insurance policy they hold. 

But sometimes legitimate claims are denied when your insurance company knowingly decides to act in bad faith. This can happen when an insurance company uses particular loopholes to get out of paying. Use this guide to learn why insurance companies deny claims and what to do about it.

1. Exclusions

Your insurance policy may include certain things that are excluded from the policy. The most common exclusions are “Acts of God,” such as earthquakes and floods. If it is proven that the actual cause of the accident was one of the items listed under the exclusion clause, your insurer may deny the claim. 

You may, however, get coverage for the excluded items by paying an additional cost or buying a separate policy that covers the excluded item. For instance, for an additional premium, you can purchase endorsements that remove the “exclusions” from your policy.

2. Covered perils

You may be denied homeowners insurance claim if the cause of the accident is not among the covered perils. Perils are the sources of the accident and include things like lightning, fire, flood, or theft. The insurance company may deny your claim if your policy does not include the source of the accident among the covered perils. 

While buying your homeowners policy, take special consideration of the type of perils covered. A good bet is to look for a homeowner’s policy that covers any direct damage to your house or property, unless the peril falls under the exclusion category.

3. Lapsed policy

If you were in an accident and the other driver was at fault, they are liable for compensation. However, the other party’s insurance company may deny the claim if the at-fault driver’s policy has lapsed. A policy may lapse if the driver stopped making premium payments, in which case your next best option is the uninsured motorist coverage. 

4. Lapse in time before reporting the accident

Notify the insurance company as soon as possible to avoid denial of a claim. Your insurance policy will dictate the time frame within which you should report the accident or damage. Once the time lapses, your insurer may deny your claim for failing to comply with the notice provision. If you are injured in a car accident, you should also seek medical attention as soon as possible since your claim may be denied if you took too long to get medical attention.

If your insurer denies the claim or is taking too long to settle yet you have serious injuries, you should contact an experienced South Dakota insurance law attorney. An insurance company may deny a claim due to lack of proper documentation, so do not forget to document all your medical expenses.

5. Outdated policy

This mostly applies to long-term care policies that were likely purchased a few decades earlier. Long-term care policies have evolved, and the policy terms may be outdated. Some insurance companies may use this ambiguity as a basis for denying a long term insurance claim, even though the South Dakota Supreme Court has said ambiguity should be interpreted in favor of the person who purchased the insurance coverage, not the insurance company.

6. Insurance bad faith

Insurance is a regulated business, and insurers have a legal duty to act in good faith when dealing with their customers or “insureds.” Simply put, your insurance company should respond to your claim within a reasonable amount of time, conduct a full investigation without twisting facts, and pay up according to the extent of the loss.

Any other tricks, such as the unlawful denial of claims, delayed payments, or attempts to settle a claim for less than its worth, may be considered as acts of insurance bad faith, or a breach of the insurer’s duty of good faith and fair dealing. For a regular policyholder with only a basic understanding of the law and your rights, it may be difficult to recognize when your insurance company is not treating you fairly by denying a valid claim. It is wise to familiarize yourself with some of the common signs of insurance bad faith.

For more information

If you think your insurer is not treating you fairly or has unlawfully denied a valid claim, contact Turbak Law Office at (866) 348-4598, and let us help you get your rightful and fair compensation.