If you happen to be in the unfortunate position where you must file for a claim on your homeowner’s policy and then discover that the claim has been denied, it is imperative that you know what to do next. Instinctively, you might want to lash out at your agent, the adjuster, or everyone involved in the process. However, it is essential that you calm your emotions and remain cool and collected so that you can review the whole situation logically. This guide will help you understand what could have led to your claim being denied and what you can do to dispute the claim successfully.
Why would your home insurer deny your claim?
You have first to understand that insurance couriers regularly deny policy claims; this means that it is not personal. Sometimes there’s reasonable cause to why the claim was denied, and at times it is a just human error.
As such, they may have made a filing mistake, misread the terms of your policy, or someone inexperienced or new in the insurance office handled your claim yet they did not fully comprehend your claim.
Therefore, it is essential that you keep detailed and accurate records of all forms of communication that you might have had with anyone in the company concerning your policy and loss. This includes the insurance firm, witnesses to the loss, and any other expert whose guidance you have sought. Therefore, document every phone call, face-to-face meeting, and email that you send or receive during the period of making your claim.
Nevertheless, here are the most common reasons to why your insurer denied your homeowner’s insurance claim.
The state of your deductible
Your home insurance policy features a deductible. A deductible is what you agree to pay a claim. As such, if the amount equivalent to your damage or loss is less than the deductible, then your insurance policy lacks enough coverage for that claim. Typically, most homeowners have a deductible of $1000.
Additionally, the deductible for hail or wind claims is usually different from other kinds of deductibles and is likely to be higher. You, therefore, need to carefully go through your policy to understand the nature of both your Wind-Hail deductible as well as that of your all Perils deductible.
Also investigate how much it would cost you to have a $1,000 deductible.
One of the most prevalent misconceptions is that insurers will cover all types of damage to your house. This is not the case. You need to know that your policy is only meant to cover a sudden loss that has an immediate source of damage. Thus, in your policy, the sudden loss is referred to as an occurrence, while the immediate damage source is known as a peril.
Perils are the cause of the loss or damage that just occurred. This implies that wind, lightning, theft, and fire are all considered to be perils. Accordingly, different perils are covered by separate policies. For instance, the three types of policies include:
- Basic (DP1 or HO1) – this policy can cover 11 categories of dangerous situations that might occur or 11 named perils.
- Broad (DP2 or HO2) – this policy covers 11 kinds of bad situations that happen or 16 Named Perils.
- Special (DP3 or HO3) – this policy covers all types of perils unless they are added as exclusions.
Therefore, for your claim to be covered, the insurance firm’s adjuster must come and ascertain that there was indeed a sudden loss (occurrence) that was caused by a peril which is included in your policy.
As such, unless your policy type is an HO3 that covers everything, chances are there are perils not covered by your policy.
Some things could be excluded from your home insurance policy or are just limited. The more common exclusions include earthquakes, floods, and sump overflow or water backup.
In coastal states, hail, hurricane, or wind are commonly excluded. Likewise, in places where wildfires are prevalent, this peril is excluded. Nevertheless, these exclusions can be covered separately for an additional cost.
As such, if either of these perils hit you, your claim might not go through because they might be excluded from your policy.
Your liability coverage
Liability coverage is a cover you take to protect yourself when bad things occur to other individuals happen because of you or your actions.
This commonly occurs when you hire people to do some work on your property.
For instance, home cleaners, tree trimmers, or landscapers are examples of individuals that could come to your property and cause damage to it.
When this happens, the liability is on them. This means that it is their policy that should pay for the damage because yours might not accept responsibility. Therefore, it is crucial only to hire people with liability insurance.
Occurrence vs. Maintenance
A homeowner’s policy will typically not cover necessary maintenance around your home. For instance, if your roof is old and leaking, you will have to replace that yourself and not the company.
This is because insurers cover, i.e., adverse events (perils) that might cause damage to your home. As such, home maintenance will not be taken care of by your home insurance policy.
Nevertheless, you might have done all that needs to be done but still get your claim denied. If you feel you are getting a raw deal, do not take it. Many people feel powerless and grudgingly move on. The truth is that there are straightforward things you can do to get fair compensation.
Claim disputes can prove to be too complicated for the average person to handle without public adjusters. Therefore, try this do-it-yourself guide before resorting to contracting an adjuster.
Be fully aware of the coverage you purchased
For the most part, claim disputes result from confusion about what your homeowner’s policy covers. Therefore, before you go throwing a fit because of the claim denial, systematically go through your homeowner’s policy to ascertain that you are indeed covered for the damage in dispute in addition to seeing what your coverage’s dollar limit is.
When you are aware of what you are entitled to under your homeowner’s insurance policy, you will be able to tell whether you are covered for that damage or not. This will also save you legal fees in case you decided to pursue legal action before checking your policy.
Review your claim
If you are still not sure why the claim was denied, or the settlement made was lower than expected, talk to your insurance agent to get further insight and clarification. If they begin citing terms such as ‘exclusion’ and another insurance-specific language, ask to be shown the section where that has been indicated in the policy.
Ensure that you are documenting everything that your claims adjuster or insurer are telling you. Keep a record of all the people you speak to, what was said, and the dates. If you get the information in person or by phone, make sure you send a follow-up e-mail confirming what you communicated.
Once you are sure of where your insurer stands, prepare all the documents that might help your case. For instance, if your insurance courier estimates that it will cost a specific sum of money to repair your home, but you think that it will require a lot more, have an independent contractor write for you an estimate to provide as proof.
Consider getting an independent appraisal
If you are positive that your carrier is shortchanging you, you could consider getting your home insurance adjuster or appraiser to give you an independent estimate.
However, these individuals may cost anywhere between $200 and $500 depending on how far they have to travel to get to your home. This means that if the cost of hiring one of these experts is roughly equal to the discrepancy in your claim settlement, you are better off saving your time and effort and just accepting the proposed settlement.
Also, note that the second professional opinion could do either of the following things: they could affirm that your carrier’s proposed settlement is indeed correct, or they could assist you in finding some loopholes that you could use to get a better settlement.
If you are fortunate enough to fall in the latter category, you can use the findings of the independent adjuster to argue the case to your favor. Now contact the claims department again and notify them about the independent estimate. You could also ask to communicate with the claims manager and have them re-evaluate your case.
Politely appeal your denial
- If the insurer is not budging, appeal to them. Now that you have all your documents ready prepare a letter to your adjuster. In the letter, briefly explain how you are perceiving everything in addition to attaching all the evidence that supports your point of view. Ask that they review the claim once more.
- Ask that they kindly reply to you within a specified period, for instance, ten days. So that you can have an accurate record of the exact days that your letter was sent and received, utilize the certified-mail option at the post office. Additionally, send a copy of this letter plus the other documents that are in support of your case to your adjuster’s supervisor.
One thing to remember, however, is to stay calm, collected, and polite even if you are seething inside. Do not be adversarial and threaten to hire a public adjuster as your carrier might decide to lawyer-up.
File a complaint and hire a Public Adjuster
If all else fails and you still feel that you are on the right, this is the option to take. However, note that most claim disputes do not make it to this point.
Nevertheless, homeowner’s insurance policyholders do have the right to report what they believe to be mistreatment or other unethical practices to the state insurance department. The department should then look into the claim and offer you advice on what steps to follow next.
- The state department of insurance usually evaluates whether your claim is indeed justified. Upon affirming that, they will then use their channel to communicate with your insurance provider and ask them to give you a better settlement.
- The state department of insurance may also suggest that you hire an public adjuster. However, they will not help take care of these expenses. You will have to bear these costs, and therefore you must weigh these costs before choosing to make the case to court.
- Suing your home insurance company will prove to be a lengthy and expensive endeavor. If you must do it, make sure the headaches, delays, and financial dents you are about to endure are worth it. This is only necessary if disputed settlement or claim is off by over $1,000.
As such, before you proceed with this step, ensure that you have exhausted all the measures provided above. Additionally, you could consider bringing in a public claims adjuster. They will assist you in navigating the process from the beginning especially if it is a substantial claim that could pay off in the end.
Claim denials and disputes are a common phenomenon in the entire insurance industry. As earlier mentioned, most of them arise due to confusion about what the policy covers. As a homeowner, you need to go through the policy before you purchase it thoroughly. This will allow you to know what you are getting yourself into. Additionally, be familiar with all the terms used in the policy agreement as these are the same phrases that will be used against you in case you are not happy with your settlement, or your claim gets denied. However, if you have done everything by the book and are feeling shortchanged, systematically follow the steps above and you will hopefully find a fairer resolution.