Written by Andy Gurczak

June 11, 2021

Insurance Claim Denied! What Now?

Insurance Claim Denied: Everything You Need To Know

What now, my insurance claim is denied?

Was your insurance claim denied? Are you frustrated and upset? Moreover, do you feel let down, put out, and depressed. Remember, A denied insurance claim is not the end of the world. In fact, we work with people everyday that have had their insurance claim denied. As a matter of fact, it is a pretty common occurrence. Sometimes insurance claims are denied for legitimate reasons. However, at other times it is a result of a filing error or even unknown reasons. If you suffer a property loss, and your insurance company denied your claim, there are steps you can take to challenge your homeowners insurance claim denial.

Remember after denying your insurance claim, your insurance company must send you a formal “Reservation of Rights” letter. Moreover, did you know that this is a requirement? In fact, this letter is meant to outline the specific reasons your insurer denied your insurance claim. Remember, once you receive that letter you have a deadline to appeal. Also, Insurance companies have to assist you if your policy is in good standing. In short, they can’t just say your insurance claim is denied!

An insurance claim appeal should include documents that prove losses and coverage in your insurance policy. If that fails, a lawyer can file a bad-faith lawsuit. In short, you have options.

1. Insurance claim denied? Will it stay on my insurance record against future claims?

Yes! A denied home insurance claim stays on your record for 5-7 years. The insurance company will note that the reason for the claim denial. For instance, if it was because of insurance fraud, the company may be suspicious of future insurance claims. Furthermore, a previously denied claim is also a warning sign for your insurance company that the home may have previous damage, which could cause an increase in your insurance premiums. Moreover, a claim denial also impacts your insurance score, which is similar to a credit score.

2. Understanding why your was insurance claim denied: How do you traverse

As aforementioned, your insurance company sends out a formal letter explaining their reason for denying your claim. This letter is meant to explain the specific language in your policy that justifies the claim denial. Read carefully and compare their explanation to your understanding of your policy. If there is a legitimate reason for denying your claim, there is nothing more you can do.

However, if after comparing, you still believe you’re entitled to compensation, request a discussion with your insurance claim adjuster and agent immediately. Reversing a claim denial is not easy. Regardless, don’t give up if you can prove you’re entitled to coverage. 

3. Insurance claim denied? Did you know you can file an appeal

That’s right, if the discussions with your insurance agent and claim adjuster weren’t of any use, you will want to proceed with filing an appeal. You only have a limited amount of time to do this. With this in mind, you can find the appeals process you must follow  in your homeowners insurance policy.

After you file a formal appeal, your denied claim is set up for a review process. First thing yo remember is to include in your appeal evidence and documentation that supports your claim. The more evidence you present, the better your chances of getting more than a cursory review of your denied claim.

4. Insurance claims denied have the right to be challenged by independent public adjuster?

Seeking advice from a licensed public insurance adjuster is the smartest move a homeowner can make. Public adjusters verify your coverage, document and value your losses, and negotiate the maximum settlement allowed under the terms of your homeowners insurance policy. The sooner you contact a public adjuster, the more they can do to help.

5. Consider an independent appraisal

Hiring your own appraiser allows you to get an independent estimate for the damage you’re trying to repair. Depending on how far away they are from your home, a private appraiser will cost roughly between $200 and $500. If the claim settlement is roughly equal to the cost of the independent appraisal, it may be more cost-effective just to take the settlement.

A second professional opinion of the damages will also confirm the accuracy of your insurance company’s settlement offer. As well as provide leverage in your argument for raising it.

6. File a formal complaint

The insurance industry is exceedingly regulated, For this reason, courts in every state are overrun with property claims disputes and bad faith lawsuits.
If you are a policyholder in good standing, you obligate your insurance to process your property claim fairly. If the treatment of your claim falls short, you have the option to file a formal complaint with your state’s insurance commissioner.

Reasons Insurance Companies Deny Fire Claims

The Home is Underinsured

Insurance coverage limits depend on the potential sale price of the home. However, this price does not consider construction and repair costs soaring after a local natural disaster. To avoid this, you can purchase an ordinance or law coverage endorsement. It pays for the difference between your sale price and increased construction costs.

Personal Belongings Are Underinsured

Sometimes, the replacement coverage of the home’s contents is not enough to truly replace what damaged or destroyed contents. For this reason, it’s important to update your home inventory list at least once a year and add it to your insurer’s records. If your content’s value increases, increase your personal property coverage.

Premium Non-Payment

It is absolutely essential to make home insurance payments on time so that your coverage is always in effect. Insurance companies aren’t obligated to cover you if you owe them payments.

Inflating the Value of Lost Property

Insurance companies often deny claims where they feel homeowners inflate losses. Keep a running inventory of the property inside and outside the house to dispute any accusation of sorts. Always include pictures and replacement values noted where possible. Those records should not be kept in the home. Instead, keep them in cloud-based computer storage.

Insurance Claim Denied: Image of Burning down a House on Purpose

Suspicion of Arson

An insurance company may deny a fire claim after a house fire if they suspect arson. If this is the case, your claim will be subject to a criminal investigation. Investigators share results with your insurance company.

Evidence of Illegal Activities in the Home

Your insurance company can deny your insurance claim if adjusters find traces of illegal activities in the home. For instance, manufacturing illicit drugs on the property.

Electrical Work Without Permits

If fire investigators uncover evidence of electrical work done without proper permits or inspections, they will probably deny your claim. Always get permits and adhere to building codes whenever you do home improvements. In addition, get your electrical systems inspected by licensed professionals before and after. Keep those records in the cloud with your other insurance documents.

Fires in Vacant Homes

Unoccupied homes are more likely to suffer severe fire damage, since no one was home to hear the fire alarm. Most home insurance policies do not cover fire damage in a vacant home. Homeowners can buy specialized unoccupied home insurance policies if no one lives on the property.

Insurance Claim Denied: Image of a FPE Panel

What if You Have an FPE Panel?

Most insurers do not provide home insurance policies for houses with Federal Pacific Electrical (FPE ) panels. Contractors installed millions of FPE panels in homes between the 1950s and the 1980s. What contractors didn’t know was that the company lied to Underwriters Laboratories, about its safety data. Only after, it was that they revealed that these FPE panels did not meet building codes and could not balance the electrical circuits

Not filing on time:

Your insurance policy requires you to notify any loss as soon as possible. There are also time sensitive requirements for the filing and documentation of any claim.

False statements or questionable claims:

Post-disaster you can expect your insurance company to send their own adjuster to investigate your claim. If they find anything suspicious or questionable involving the original application for coverage or with the claim itself, a claim denial is possible.

Insufficient documentation of the damage:

One of your responsibilities, besides filing an insurance claim, is to prove your claim to the insurance company. Therefore, it is extremely important that you accurately document the damage. Be as detailed as possible and take as many photographs of the aftermath as you can. You will then submit the evidence to help prove your case.

Exclusion clauses:

Every property insurance policy comes with its exclusions. If the cause of your property damage is excluded from coverage in your policy, then you can expect to have your insurance claim denied.

Not taking sufficient preventative measures following a loss:

Following a property loss, it is necessary that you protect the property from further damage and to mitigate the extent of loss. Leaving the property exposed to additional loss and not taking reasonable steps to reduce the extent of the loss, could be grounds for a denial.

To Sum Up:

  • Notify your insurer promptly of any loss and understand the requirements time limits for filing a claim.
  • Make sure your home is properly insured
  • Pay your premiums on time.
  • Know what your policy covers and excludes and obtain adequate coverage if available.
  • Take all reasonable steps to protect your property and mitigate the damage.
  • Document all damage and file a detailed itemized claim to your insurer.
  • Don’t make exaggerated or false claims
  • Have home improvements done by licensed professionals
  • Keep an updated inventory

Insurance Claim Denied: Natural Disasters

Disputing Natural Disaster Claims

Most insurers handle natural disaster claims the same way as any other claim. However, disasters often lead to a huge wave of simultaneous claims. As a result, it can be challenging for insurers to respond quickly.

For this reason, state insurance departments usually set special dates for insurance companies to acknowledge a claim has been filed. Companies usually have 15 days to acknowledge a claim but extensions are common due to a natural disaster.

A higher volume of claims might also force insurance adjusters to make rough estimates in each case. In that case, the policyholder should expect a second visit from an adjuster at a later date. In fact, you should make the second appointment during the first one if you can.

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At AllCity Adjusting we help residential and commercial clients alike get the claims support they need. Moreover, we have over 50 years of combined experience helping get our clients the max settlement time and time again. If your claim has been low balled or denied entirely we can help increase your maximum settlement. Call us today for a FREE consultation. Experience the AllCity difference.

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Salvageable v. Non-Salvageable Property After a Fire

Salvageable v. Non-Salvageable Property After a Fire

If a fire has occurred at your home, your first concern, of course, is the safety of yourself and your family. However, depending on the extent of the fire damage, you will have to resolve the issue of salvageable v. non-salvageable property after a fire. Homeowners’ insurance protects your home itself (Dwelling Coverage) and its contents (Personal Property Coverage). High heat, smoke, and soot can cause extensive damage to your personal property, such as clothes, furniture, hardwood floors, and appliances. For instance, smoke damage causes fabrics, clothes, and soft goods to reek of the smell of smoke. Additionally, smoke and soot can discolor objects and reduce the life span of electronics and machinery. Consequently, you and your insurance company will have to determine which personal property is salvageable v. non-salvageable property after a fire.

Actual Cash Value v. Replacement Cost Value

Actual Cash Value v. Replacement Cost Value

Many homeowners never read their homeowners’ insurance policy. Then a covered loss, like a fire or hurricane, causes extensive damage to the home and contents. Of course, the homeowner files a claim with her insurance company. Eventually, the homeowner gets a claim settlement offer from the home insurance company. However, only then does the homeowner learn the difference between actual cash value v. replacement cost value coverage.

What is an Appraisal Clause in an Insurance Policy?

What is an Appraisal Clause in an Insurance Policy?

Water damage insurance claims are some of the most frequent home insurance claims that homeowners file. However, homeowner insurance does not cover all types of damages caused by water. Therefore, handling water damage insurance claims requires the homeowner to be careful and diligent before and during the claims process.

Homeowners’ Property Damage Claim-Do You Need an Attorney?

Homeowners’ Property Damage Claim-Do You Need an Attorney?

Unfortunately, a terrible storm moved through your area. It left fallen trees and damaged homes in its wake. Your house was one of them. You have never filed a claim with your homeowners’ insurance company. But you now have a homeowners’ property damage claim-do you need an attorney?

How to Negotiate a Fire Damage Insurance Claim

How to Negotiate a Fire Damage Insurance Claim

One of the most traumatic events experienced by homeowners is a fire in their homes. Certainly, the potential for serious injury can be significant. However, the relief that no one was harmed soon fades away as the reality of the property damage sinks in. Now, one key question for the homeowner will be how to negotiate a fire damage insurance claim settlement.

Insurance Claims for Poorly Installed Stucco

Insurance Claims for Poorly Installed Stucco

Stucco is a popular siding used on new developments, homes, and businesses since the early 1900s. Manufacturers make it of cement, limestone, and silica. In fact, it has become very popular in the last 20 years. However, when not installed properly, it can lead to several problems. Therefore, some homeowners will have to file insurance claims for poorly installed stucco.

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