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What to do if a car insurance company denies your claim

Bankrate logo Bankrate 7/8/2021 Mandy Sleight
a boy sitting at a table using a laptop: Family at home © Geber86/Getty Images Family at home

Being involved in a car accident is stressful on its own, but it is even worse if your auto insurance company denies your claim. When an insurance company refuses to pay an auto claim, it is typically for a legitimate reason, but not always. In case you experience a claim denial, understanding why a claim was rejected - starting with your claim denial letter - and what to do if it happens is important.

Understand your claim denial letter

If a car insurance claim is denied, the insurance company will send out a claim denial letter. In this letter, the insurance adjuster states what factors led to the decision. It is important to read the entire claim denial letter to understand the insurer's reasoning.

If you do not agree with the insurance claim denial, you have options available to you to appeal the insurance company's decision.

Know why your car insurance company denied your claim

Depending on the circumstances surrounding your car insurance claim, there could be several factors that result in your claim being denied. Police reports, eyewitness statements, recreating an accident scenario and more can influence the outcome of a submitted auto insurance claim. If you receive a denial letter, make sure to read it carefully, as it will typically include supporting evidence for the decision.

Some common reasons a claim is denied include the following.

Lapsed insurance policy

Without valid insurance in place at the time of an accident or claimable event, there is no coverage for the insurance company to pay out. Paying for auto and home insurance on time or even early is the best way to ensure coverage is in force when you have to file a claim. Whether you pay the policy term in full or use auto-pay to prevent missed payments, avoiding a lapse in coverage is crucial. In addition to the likelihood of your claim being denied, a lapse in coverage could also result in fines depending on the state you live in.

Policy exclusions

When you purchase car insurance, pay attention to the coverages you choose and what they provide financial protection for. For example, you may have an older car and feel comprehensive and collision coverage is not needed. However, if your car is stolen or you cause an accident, the insurance company will not be able to assist without the proper coverages in place.

When reviewing your claim, the adjuster can see your policy's inclusions. Filing a claim for damage that you either lack coverage for or that is specifically excluded will result in a claims denial letter being sent.

Not enough coverage

It can be tempting to choose state minimum liability limits to keep the cost of car insurance low. While you may save on your premium, if you are involved in an accident with several injuries to others or hit an expensive car or building, you may exhaust your liability limits. For example, say you have $25,000 in property damage liability coverage, but you total a car worth $40,000. The auto insurance company can pay up to the $25,000 allotted, but deny the remaining $15,000, which could leave you vulnerable to a lawsuit for the remaining amount.

Consider other reasons your car insurance company can deny a claim?

There are other reasons why an auto insurance company may deny a claim, such as if you commit a crime that results in an accident, do not have a valid driver's license or are an excluded driver on a policy. All of these scenarios often lead to a claim denial letter. Here are a few other reasons an insurer may deny a claim:

  • You were in an accident with an uninsured motorist: While most states require liability coverage, not all of them require uninsured motorist coverage. If someone causes an accident with you and provides false insurance information or does a hit-and-run, finding proper insurance details may be either difficult or impossible. However, if you have uninsured motorist coverage on your car insurance, you can then file a claim with your auto insurer to help pay for your damages or injuries.
  • An at-fault driver's insurer denied your claim: In instances where another driver is considered at fault and their auto insurance company denies the claim, there could be several reasons why. Some examples include providing incorrect insurance details or not having enough or the right coverage. Additionally, if an accident occurs in a no-fault state, you are responsible to pay for your own medical expenses and lost wages.
  • Your claim was denied in bad faith: If an insurance adjuster denies a claim in bad faith, it means they lack grounds to have made the decision based on the evidence provided. In this case, your claim may have been wrongly denied. You may have to supply additional documentation, but you do have the option to appeal the claim denial decision.

Appeal your car insurance claim denial

If you feel there was an error in the car insurance company's claim denial, you can appeal the decision. Most insurance companies have a process in place for you to combat a denied claim. Here are some steps to consider taking in appealing an auto insurance claim decision:

  1. Gather evidence: Review any documentation provided by the insurance company and gather the evidence you need to appeal. This could include police reports, eyewitness information, photographs, medical reports and other supporting evidence. Make copies of everything to provide to the insurance company so you can keep the originals.
  2. Draft an appeal letter: This letter will spell out why you do not agree with the insurance company's decision. Make sure you explain why each piece of information was provided in step one, such as any police reports. Provide as much detail as possible, referencing policy information and the claims denial letter as needed.
  3. Consider hiring an attorney: If you are not comfortable taking these steps or want an expert's opinion, it may be a good idea to hire an attorney. They can review the case as well as your supporting documents to draft a demand letter requiring the insurance company to respond and defend its claim denial. While it may cost money, it could be a worthwhile expense to have the claim overturned if you feel you were wrongly denied.

Understanding the claim denial letter and why an auto insurance company decided not to make a payout is the first step in determining the validity of a denied car insurance claim. Most instances of claims denials are valid, although others may not be. In this case, appealing the insurance company's decision can get the decision reversed or an offer made for damages.

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