You give your car insurance company your complete trust when you pay your premium in full or make your monthly payments. The expectation is that they will abide by the terms presented within the policy just as you abide by those terms as a paying customer. If you ever have to file a claim due to an accident or damage to your vehicle, you may get the shock of a lifetime: the insurance company refuses to pay for damages.
This is an intimidating situation for most consumers because the insurance company seems to have all the power. For instance, they have access to expert legal representation before the denial is even issued. You can hire your own legal representation and appeal, but the best course of action is to avoid this situation.
You do this by thoroughly studying the terms of your policy. When you know what you must do to remain in good standing and have a solid understanding of what the policy covers, you can make wise decisions as a policyholder. Keep reading to learn more about some of the biggest reasons claims are denied.
If you pay your insurance premium in full, you must make sure your renewal payment and documentation is submitted before your current policy expires. If you pay in installments, you’re responsible for ensuring that each payment is submitted on time. If you fail to make payment in either case, the insurance company can cancel your policy. If you’re involved in an accident or your vehicle is damaged before you secure a new policy or reinstate the canceled policy, the insurance company will likely deny your claim.
Mistakes Do Happen
There are some cases where an insurance company mistakenly denies a claim on the premise that the vehicle or driver was uninsured at the time of the claimed incident. This may result from human error or information that is incorrect within the company’s system. You can appeal the decision in this case, and the mistake is often corrected after you present evidence proving that you were covered.
Most auto insurance policies include a clause which states that the policy is only valid if the insured provides complete and accurate information to the insurance company. This is stated in more complicated language that you may not understand, but the term “material misrepresentation” will catch your eye in the denial notification.
If this is mentioned in a claim denial, it means that the insurance company is alleging that you failed to provide required information to them, lied about information when you applied for the policy or failed to update information. They should reveal what information is in question when issuing the denial, and you can collect evidence and appeal if you disagree with their decision.
This reason for denial is often given when a driver modifies their vehicle without reporting the changes to the insurance company. Something as simple as changing the tires is often enough for an insurance company to claim a modification occurred, especially if you upgrade to high-performance tires.
In some cases, insurance companies can deny a claim simply because you failed to update your address after moving or failed to inform them of other drivers living in your household. This is why it’s important to answer all questions honestly when applying for insurance and to update your contact information whenever necessary.
This is a term that insurance companies use when the claim includes damages that aren’t covered by the policy. It is most commonly used in relation to liability policies which don’t include damages sustained by the insured party. Liability insurance will only cover damages that the insured causes to another driver’s vehicle or physical body, so the company will deny any claim related to the insured driver’s vehicle or medical bills.
If you have comprehensive coverage without collision, then you may also run into a coverage exclusion denial if your vehicle is damaged during a collision. This can catch some drivers off guard if they don’t understand the difference between collision and comprehensive coverage.
This is also a hot topic now that many drivers are working for rideshare companies like Uber. Many insurance policies exclude coverage when the driver is transporting a passenger for payment. This is considered a for-hire exclusion, and many rideshare services are now offering their own insurance policies to cover drivers while operating their vehicle for pay.
These are the easiest type of denials to avoid. Knowing the terms of your policy will help you decide whether you have the right to file a claim in a variety of situations.
Coverage Exclusions vs. Limitations
You may file a claim for damages that you know are covered by your policy, but you must also consider how much coverage you have through the policy. When the damages exceed the dollar value of your coverage, then the insurance company may agree to pay only part of your claim. You remain financially liable for the remaining balance.
For instance, let’s say you have full coverage, but your policy is capped at $100,000 for damages to another driver’s vehicle. If you cause an accident and total a vehicle worth $150,000, the insurance company is only responsible for paying out $100,000. The other driver may then sue you for the remaining $50,000.
Fraud & Unlawful Acts
If the insurance company decides that your claim is a result of a criminal act or that it is an act of fraud, they can legally deny the claim. This may occur if you wreck your vehicle while driving under the influence of drugs or alcohol, and they can find out about that through the police report. If the company has reason to believe that you intentionally damaged your vehicle or allowed someone else to steal it in order to file the insurance claim, you may have to hire a lawyer and fight the accusations in court.
Read & Compare
Now that you know some of the reasons your auto insurance claim can receive a denial, go read your policy. Update any information that has changed since you last spoke to your insurance agent. If you’re unsatisfied with the terms of your policy, compare quotes from other companies online. You may find that another company will offer better terms if you’re interested in modifying your vehicle or making other changes that may interfere with your current policy.