Why Would a Home Insurance Claim Be Denied? 5 Common Reasons and Solutions

Home insurance is a type of protection that covers your home and personal belongings from various risks, such as fire, theft, vandalism, storm damage, and more. 

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Denied Homeowners Insurance After a Claim | PolicyScout

However, having home insurance does not guarantee that your claim will be approved every time you file one.

There are many reasons why your home insurance provider may deny your claim, and some of them may surprise you.

In this article, we will explore some of the most common reasons for home insurance claim denials and what you can do to avoid them or dispute them.

 

1. The damage is not covered by your policy

One of the most obvious reasons for a claim denial is that the damage you are claiming is not covered by your policy.

Home insurance policies have different types of coverage, such as dwelling coverage, personal property coverage, liability coverage, and additional living expenses coverage.

Each type of coverage has its own limits and exclusions, which are the situations or events that are not covered by your policy.

For example, most home insurance policies do not cover damage caused by flooding, earthquakes, landslides, mold, wear and tear, or intentional acts.

If you live in an area that is prone to these risks, you may need to purchase additional coverage or a separate policy to protect your home and belongings.

What to do:

To avoid this reason for a claim denial, you should read your policy carefully and understand what is covered and what is not.

You should also review your policy periodically and update it if your needs or circumstances change. If you have any questions or doubts about your coverage, you should contact your insurance agent or company and ask for clarification.

 

2. The damage exceeds your policy limits

Another reason for a claim denial is that the damage you are claiming exceeds the limits of your policy.

Your policy limits are the maximum amount of money that your insurance company will pay for a covered loss.

For example, if your dwelling coverage limit is $300,000 and your home suffers $400,000 worth of damage from a fire, your insurance company will only pay up to $300,000 and you will have to pay the remaining $100,000 out of pocket.

What to do:

To avoid this reason for a claim denial, you should make sure that your policy limits are adequate to cover the full replacement cost of your home and belongings.

You should also consider adding endorsements or riders to your policy that can increase your limits for certain items or situations.

For example, you may want to add an inflation guard endorsement that automatically adjusts your limits to keep up with inflation or a guaranteed replacement cost endorsement that pays the full cost of rebuilding your home regardless of the limits.

 

3. The damage is due to negligence or lack of maintenance

Another reason for a claim denial is that the damage you are claiming is due to negligence or lack of maintenance on your part.

Home insurance policies require you to take reasonable care of your property and prevent further damage after a loss. If you fail to do so, your insurance company may deny your claim or reduce the amount of compensation.

For example, if you have a leaky roof that causes water damage to your ceiling and walls, your insurance company may deny your claim if they find out that you knew about the leak but did not fix it in time.

Similarly, if you have a burst pipe that floods your basement, your insurance company may deny your claim if they find out that you did not turn off the water supply or call a plumber as soon as possible.

What to do:

To avoid this reason for a claim denial, you should perform regular maintenance on your home and fix any problems as soon as they arise.

You should also document any repairs or improvements you make to your home and keep receipts and invoices as proof.

If you suffer a loss, you should take steps to mitigate the damage and report it to your insurance company as soon as possible.

 

4. The claim is missing information or documentation

Another reason for a claim denial is that the claim is missing information or documentation that is necessary to process it.

Your insurance company needs to verify the cause and extent of the damage, as well as the value of the items that are lost or damaged.

If you do not provide enough evidence or details to support your claim, your insurance company may deny it or delay it until they receive more information.

For example, if you claim that some of your jewelry was stolen during a burglary, but you do not have any photos, receipts, appraisals, or police reports to prove it, your insurance company may deny your claim or ask for more proof.

Similarly, if you claim that some of your furniture was damaged by smoke from a fire, but you do not have any photos or estimates from contractors to show the extent of the damage, your insurance company may deny your claim or offer a lower settlement.

What to do:

To avoid this reason for a claim denial, you should prepare an inventory of all your personal belongings and their value before a loss occurs.

You should also take photos or videos of your home and its contents and store them in a safe place.

If you suffer a loss, you should document the damage and the circumstances as soon as possible and gather any relevant documents, such as police reports, repair bills, or receipts.

5. The claim is fraudulent or exaggerated

Another reason for a claim denial is that the claim is fraudulent or exaggerated.

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Home insurance image[PPHOTO COURTESY OF JUBILEE]
Fraudulent claims are those that are intentionally false or misleading, such as claiming for items that were not stolen or damaged, staging a loss, or inflating the value of the items.

Exaggerated claims are those that are partially true but overstated, such as claiming for more items than were actually lost or damaged, exaggerating the extent of the damage, or inflating the cost of repairs or replacements.

Fraudulent and exaggerated claims are illegal and can result in serious consequences, such as fines, penalties, lawsuits, criminal charges, or cancellation of your policy.

They also harm other policyholders by increasing the cost of insurance premiums.

What to do:

To avoid this reason for a claim denial, you should always be honest and accurate when filing a claim.

You should not claim for anything that you are not entitled to or exaggerate the value or severity of your loss.

You should also avoid any actions that may raise suspicion or doubt about your claim, such as disposing of damaged items before they are inspected, changing your story, or withholding information.

How to dispute a home insurance claim denial

If you believe that your home insurance claim was wrongly denied or underpaid, you have the right to dispute it and seek a fair resolution.

Here are some steps you can take to challenge a claim denial:

1.Review your policy and denial letter

Read your policy carefully and understand what is covered and what is not.

Compare it with the denial letter from your insurance company and identify the specific reason for the denial.

If you find any errors or inconsistencies, point them out to your insurance company.

2.Contact your insurance company

Call or write to your insurance company and explain why you disagree with their decision.

Provide any evidence or documentation that supports your claim and ask them to reconsider it.

Be polite and professional, but firm and persistent.

3.Request an appraisal

If you and your insurance company cannot agree on the value of the damage or the items, you can request an appraisal.

This is a process where each party hires an independent appraiser to evaluate the loss and determine its value.

The appraisers then select an umpire who acts as a mediator and resolves any disputes. The decision of the appraisal panel is binding on both parties.

4.File a complaint

If you are still not satisfied with your insurance company’s response, you can file a complaint with your state’s insurance department or regulator.

They will investigate your case and mediate between you and your insurance company.

They may also impose sanctions on your insurance company if they find any violations of the law or regulations.

5.Hire a lawyer

If all else fails, you can hire a lawyer who specializes in insurance claims and sue your insurance company in court.

However, this should be your last resort, as it can be costly, time-consuming, and risky.

You should only pursue legal action if you have a strong case and a large amount at stake.

Conclusion

Home insurance claims can be denied for various reasons, some of which may be valid and some of which may be unfair.

If you face a claim denial, you should not give up easily and accept it without question.

You should review your policy and denial letter carefully, contact your insurance company and ask for an explanation, provide any evidence or documentation that supports your claim, request an appraisal if necessary, file a complaint with your state’s insurance department if needed, and hire a lawyer if warranted.

By following these steps, you may be able to dispute a home insurance claim denial successfully and get the compensation you deserve.

However, prevention is better than cure, so you should also take measures to avoid claim denials in the first place by understanding your coverage, maintaining your property, documenting your belongings, reporting losses promptly, and being honest and accurate when filing claims.

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