What Benefit Does an Insurance Company Have to Deny a Claim?
Your homeowner’s insurance is a contract between you (the insured) and the insurance company (the insurer). In exchange for your premium payments, the insurer agrees to indemnify you against loss resulting from insured perils.
This means that your insurance company promises to compensate you for any losses incurred as a consequence of an event that is covered by your policy. Considering that insurance companies exist on the premise of covering losses, what benefit would they have in denying a claim?
It is noble to think that insurance companies exist solely to serve clients in their time of need. However, keep in mind that they are in business to make money, not give it away. Insurers seek to avoid or reduce payouts if possible because the more money they relinquish for claims, the less profit they generate.
Ultimately, the cost of premiums would have to increase so that the companies can reach their profit goals.
Insurance companies write their homeowners policies quite thoroughly to be sure that their contract with you clarifies your rights and conditions of coverage or denial. The reasons that insurers deny claims are manifold. Ultimately, insurers hope to deter fraud, abuse, and waste.
It is common for insurance companies to deny claims because the claims falls outside the scope of the policy. Also, many denials are based on disagreements over the actual cost of loss or damages.
A claim may be denied because the loss was not covered in the policy. Many kinds of homeowner’s insurance policies cover various disasters, so if the damage or loss you incurred was not a result of a covered peril, your insurer is not obligated to compensate you.
For instance, if your home is damaged by a flood but you did not have flood insurance in place, your insurer is not obligated to honor any claim related to the flood damage. Pay attention to how your insurer classifies the cause of your loss or damage and ensure that their assessment is correct.
If the loss or damage occurred outside of the period of policy coverage, the insurance company will not honor the claim. If you did not meet specified obligations of coverage, such as reasonable maintenance and damage prevention or timely payment of premiums, your claim is likely to be denied.
If your claim is denied, it is critical that you review the denial letter and your policy to determine if your insurer's judgement is valid.
A denial letter is not the end of the road in obtaining compensation for damage to your home. It is quite possible that your denial may be reversed if you know what to do and remain persistent.