Finding out that your property has been damaged is an unsettling experience. But things can go from bad to worse if the insurance company denies your claim for reimbursement.
Insurance claims can be denied for a host of reasons. In some cases, simply policyholder mistakes are behind the denial. If you want to avoid wasting money, try to steer clear of these common insurance claim errors.
Not reading your policy thoroughly
Insurance policies are highly customized, so you need to be familiar with what your policy does and doesn't cover. If you switch insurers, don’t assume the new company will offer the same coverage as your previous insurer.
Go through every policy with a fine-toothed comb and make sure that you’re familiar with coverages, deductibles, and limits. Check the policy long before filing a claim.
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Not buying enough insurance
Underinsurance is a common problem. Repairs on large claims can cost much more than many homeowners think.
In recent years, inflation has caused the cost of construction — both materials and labor — to jump. So make sure your policy offers enough coverage to replace or repair your home at today’s costs.
Also, note whether your policy replacement cost or actual cash value coverage. The latter type of coverage only replaces your items for their depreciated value, which could leave you with higher out-of-pocket costs.
Poor or missing documentation
Insurance companies need proof of loss before they will pay out a claim. Take multiple photos and/or videos that show the damage or problem from all angles, and make sure the images are clear and detailed.
Also, keep records of all your interactions with the insurance company, adjuster, and other third parties. You can rely on these later if you end up in a dispute over your claim.
Not calling the police
If a law has been broken — as in the case of a burglary or an automobile accident — your insurer likely will ask you to contact law enforcement.
While waiting around for the police and filling out paperwork isn’t fun, it serves as additional evidence to back up your claim of loss and documentation of the damage.
Failing to contact the authorities could result in you having to gather additional evidence (such as eyewitness statements) to back up your claim.
Not questioning your insurer’s payout
Adjusters are human, so they make mistakes. If you disagree with the value an adjuster assigned to your claim, speak up.
You may have to file a complaint, or your insurance agent may be able to help. Contact your state’s insurance department for more resources on challenging unfair assessments.
Not filing claims quickly
If you don’t report your problem to the insurer immediately, it may cast doubt on the validity of your claim.
Call your insurance company as soon as possible, even for things that don’t seem like emergencies. Calling within 24 hours is a safe bet.
Filing unnecessary or small claims
In the case of minor damage, it may be more cost-efficient to fix the problem yourself rather than involving the insurance company. Filing a claim often results in your having to pay a deductible, which may be greater than the cost of the damage itself.
Your premiums also can go up after filing a claim. So, for minor repairs, it’s often better to pay for them out of pocket.
Pro tip: Always stay on top of your insurance coverage. For example, if you live in the path of hurricanes or wildfires, prepare yourself financially for these events by ensuring you have the proper coverage long before disaster strikes.
Filing too many claims
If you file too many claims within a short period, your insurer may perceive you as an increased risk and choose not to renew your policy. This can be true even if the claims were documented and justified.
For this reason, it’s important to be judicious about when to file and when not to file a claim with your insurance company. If it’s something you can easily take care of on your own, it’s often best to avoid making a claim.
Even if you believe you were the cause of an accident or damage, never state that act out loud or in writing.
If you admit fault, getting the compensation you're entitled may be more challenging. If you're unsure what you should and shouldn't say about the accident, consider hiring a lawyer.
Getting rid of damaged property
After a damaging event, you probably want to get rid of bedding that smells of smoke or a crumpled car door. However, it’s essential to retain all damaged property after an incident until the adjuster has a chance to inspect and document it.
Your insurance company likely won’t reimburse you for damaged property unless it can substantiate your claims.
Not cooperating with your insurance company
While dealing with insurance companies and paperwork can be frustrating, it's best to follow proper procedures if you want your claim to be paid.
So, if your insurer asks for additional information, provide it promptly.
Letting your insurance lapse
Review your policy once or twice a year to ensure that you have adequate coverage. And make sure you keep a reminder in your calendar about your policy’s renewal date.
Set your credit card or bank account to pay the bill automatically so your policy isn’t canceled due to nonpayment.
Not maintaining your home properly
If your negligence contributed to why your property was damaged, it’s unlikely that your insurer will be willing to foot the repair bill.
So, keep your home in good condition, and make repairs promptly.
Not taking inventory of your home
Take a home inventory by making detailed notes about valuables. For example, write down that you have an “18-inch black pearl necklace valued at $200” rather than simply a “pearl necklace.”
Even better, walk through your home while taking a video of each of your valuable items. Save this to the cloud or an off-site server.
Many insurance claim denials are due to mistakes the insured made in some way.
Taking a few preventive measures and exercising a lot of common sense will ensure you don't get caught off guard if your insurer denies your claim.
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