Homeowners insurance is designed to alleviate financial hardship if your house is damaged. However, if a claim settlement offer falls short of expectations, or your claim is dismissed entirely, you may become even more disappointed than before.
Disputes between customers and home insurers over claim payouts arise for a variety of reasons, ranging from technical text buried in a policy to disagreement over the true cost of fixing your house.
If you believe you are getting a raw deal, you do not have to accept it. Here’s how to present your argument.
What to do when your home insurance claim is denied
If your insurer refuses to pay your claim entirely, follow these steps.
Please read your policy and denial letter carefully
Claim payment issues can sometimes stem from confusion about your home insurance coverage.
Before you get all up about a denial, go over your homeowners insurance policy. Check to see if you are covered for the disputed damage and what your coverage’s dollar limits are. For example, your claim may be denied if the cause of the damage is specifically excluded from your coverage. Flooding and earthquakes are typical examples of such exclusions.
Your insurer will often send you a letter explaining why your claim was denied, citing the relevant section of your policy. If you did not receive this letter or need further explanation, please contact your insurance company.
Knowing what you’re entitled to under your coverage will help your case if you’re in the right. If you’re not, it will save you time and energy on ineffective appeals.
Build a case
If you still believe your claim should be covered, gather proof to back up your point.
Say your insurance company declined your claim because it believed the harm was caused by your negligence. To counteract this, gather receipts proving that you have performed routine maintenance on your property. You can also have an outside contractor confirm that the damage was caused by a covered problem, not a lack of maintenance.
A public insurance adjuster may be able to help. A public adjuster, unlike an insurance company’s adjuster, works for you and can help you get the most out of your insurance coverage. If they believe that your claim should be covered, they can assist you negotiate with your insurance company.
Appeal the claim denial
Once you’ve gathered proof to support your claim, submit a written appeal to your insurance carrier. Explain your point of view, provide any supporting paperwork, and request that the adjuster review the claim.
Choose certified mail at your post office to keep track of the precise date your letter was dispatched and received.
Maintain your pleasant demeanor, even if you’re furious inside. Do not threaten to get an attorney. If you take an antagonistic tone immediately away, your insurance may choose to let its lawyers do the talking.
File a complaint with your state insurance department
If your adjuster refuses to budge, submit a complaint with your state’s insurance department.
According to Amy Bach, executive director of United Policyholders, a consumer advocacy group, having the state insurance department on your side may provide you with some negotiating strength.
Unfortunately, she points out, state insurance departments may not always have the authority to handle certain disputes between insurers and policyholders.
The department of insurance will assist if possible, she says, so it’s definitely worth a shot, especially if you don’t want to pay for legal representation.
Consider mediation
Mediation involves employing an independent individual, or mediator, to work directly with you and an insurance company representative to help you reach an agreement.
You and your insurer may split the cost of mediation, unless your policy or state law requires your insurer to pay. The mediator can be appointed by the court or chosen by both parties. You can also participate in a state-sponsored mediation program, which is normally available through your state’s department of insurance website.
Mediation is usually quick, but it is not binding, so you or your insurer can pretend nothing happened if either party is unhappy with the conclusion.
One disadvantage is that the insurance company representative will most likely have been trained for the process, whereas it will be completely unfamiliar to you. Your insurer might also employ mediation to assess the strength of your case. You can end up squandering time and money without getting any closer to a solution.
The last resort: File a lawsuit
Suing an insurance company can be a lengthy and costly procedure. Before filing a lawsuit, consider the strategies indicated above.
How to dispute a low-claim settlement
If your home insurer agrees to pay your claim but the settlement amount is insufficient, you have a few options.
Double-check your coverage
Examine your homeowners policy, beginning with the declarations page. This is often where you will find a list of your coverage limits and deductibles. In some situations, your settlement offer may be inadequate because you did not acquire sufficient insurance.
Assume your home burns down and contractors estimate that it will cost $300,000 to replace. If your policy only includes $250,000 in dwelling coverage, your insurer will pay that amount. (There are some exceptions here. If your policy contains extended or guaranteed replacement cost coverage, your insurer will pay a sum that exceeds your dwelling coverage limit to rebuild your house.)
Remember that the initial check you get from your insurance company may not be the only one. If your belongings are covered for replacement cost, your insurer may first reimburse you based on their reduced worth. That implies you’ll receive less for each item than you paid because it’s worth has decreased since you purchased it.
However, once you have replaced the item, you will receive another check to cover the additional cost of purchasing a brand-new replacement.
Here is one example. You purchased a sofa for $1,200 a few years ago, but your insurance company believes that it was only worth $800 when your house burned down. The corporation would pay you an initial settlement of $800. If it ended up costing you $1,500 to purchase a brand-new replacement sofa of comparable quality, the insurer would refund you for the additional $700 once you supplied a receipt.
File an appeal
Bach advises preparing papers that can help prove your case once you’ve determined your coverage and your insurer’s viewpoint. For example, if your insurance company estimates that it will cost a specific amount to restore your home, but you believe it will cost more, obtain a written quote from an independent contractor.
Explain your case in writing to the insurance company, including estimates, images, and other supporting data.
Ask for another at-home visit
If you and your adjuster disagree on the level of damage to your home, you can request that they inspect it again. If you’ve gotten second opinions from independent contractors or other professionals, such as a smoke-contamination investigator or mold inspector, bring them with you to meet with the adjuster.
“Get everyone in the same room,” Bach suggests. Determining the full extent of the harm is not an exact science, she explains. It may help your case if additional specialists can physically point out harm that your adjuster may have overlooked and discuss potential future measures.
Complain to the State Insurance Department
If your appeal has not been successful, you may choose to contact your state’s insurance department. When you register a complaint, the agency will investigate the contents of your claim to ensure that the insurance company handled it correctly.
Get an appraisal
Appraisal is a process that resolves arguments between homeowners and insurers about the extent of damage and the cost of restoration. (Appraisal is typically not an option for coverage denials.)
Each side chooses an appraiser to represent them. This could include a public adjuster, a contractor, or another professional. Bach suggests that lawyers could be involved on both sides. Each party pays its own appraiser, and all other costs are split equally.
The two appraisers assess the damage to your home and valuables and attempt to reach an agreement on how much you owe. A neutral party chosen by the appraisers, known as an umpire, resolves any disagreements between the appraisers and determines the ultimate award. The decision may be binding.
The main disadvantage of appraisal is that it just identifies what was destroyed and how much it costs, not whether your insurer is obligated to pay that amount. Appraisal will not address conflicts about your coverage, policy language, or other issues that are preventing your claim from moving forward.
Try mediation
Mediation is another option for resolving problems with your insurer. As previously said, this involves hiring a neutral specialist to assist you and an insurance company representative in reaching an agreement. However, because it is nonbinding, you may walk away without a satisfied outcome.
In general, the cost of a mediator will be divided between you and your insurer, or the insurance company will cover the entire amount.
Turn to litigation
When rejecting a settlement, filing a lawsuit is usually your final alternative, just like denying a claim. Because of the time and expense involved, you may not want to pursue this option unless there is a significant difference between the amount your insurer offered and the one you expected. And you’ll probably want to exhaust all of the alternatives listed first.
More tips
Keep a written record of everything your insurance and/or claims adjuster tells you. Keep a record of the dates, who you spoke with, and what was said. If you receive information by phone or in person, send a follow-up email to confirm what you heard.
The United Policyholder claim guidance library offers samples of claim forms and requests. It also includes sample proof-of-loss documentation that may be useful in your case, such as damage reports from independent specialists.
