Three of the most Common Reasons for Insurance Claim Denial

While there may be many reasons for an insurance company to deny a claim, there are three, which are fairly common.

The first reason the insurance company may deny a claim is due to inaccurate information provided by the insured on the application of insurance or in other documents.  Most policies contain language similar to the following: We do not provide insurance to the insured, who before or after the loss has intentionally concealed or misrepresented any material fact or circumstance.  Some applications for insurance ask if there have been any previous insurance losses in the past 5 years and whether there is any existing damage. Sometimes potential policyholders who are normally very honest people are tempted to answer “no” due to fear that the insurance company may not otherwise issue them a policy. Other rationalizations frequently cited are that the damage was minimal, that no payment was received from the insurance company for the claim, or that they honestly forgot about the claim.  So, they answer “no” in hope that the insurance company will issue a policy. Unfortunately, having a policy issued in this case is not a guarantee of coverage! The insurance company may issue the policy and collect premiums for years without researching prior claim history or inspecting for damage. However, when the policyholder files a claim the insurance company may look for prior claims, discrepancies, or omissions in the insurance application or for preexisting damages. It is only at this time that the carrier discovers the “misrepresentation” leading to denial of the claim.  Inaccuracies on insurance policy applications or information supplied when completing insurance documents may void the policy resulting in loss of coverage. In some cases, legal counsel can help with this type of denial.

The second frequent cause of denial is for the insurance company to deny a claim when they determine the loss is due to wear, tear, or deterioration. A homeowner’s policy usually states this type of peril is not covered.  This type of denial is frequently received after a hail or windstorm. While the homeowner’s shingles may, in fact, show signs of wear and tear, this does not remove coverage for hail or wind damage. You will need a professional to differentiate between the damage attributed to “wear and tear” and damage due to the covered perils of wind and hail. Your public adjuster will concentrate on the damage created by the covered peril.  Do not try to handle this type of denial without the assistance of a professional.  What you do not know may cost you.

The third reason often seen for the insurance company to deny a homeowner’s claim is for water seepage or leakage that occurs over a period of more than 14 days or over an extended period of time, or over a period of time. Many homeowners have recounted horror stories wherein they answered a series of scripted questions asked by the insurance company representative only to find out later that their replies were used to deny the loss. Remember, do not intentionally deceive the insurance company but be cautious about replying to questions when you do not understand what you are being asked. Examples are questions like “Where did the water come from?” or “How long has it been leaking?” Do not speculate if you do not actually know the source of the water damage or how long it has been leaking or you may find your claim denied. While your public insurance adjuster can sometimes help correct these misunderstandings, it is much better to avoid this type of denial.