If your homeowners insurance claim was denied, here are the steps to take.
If something goes wrong, such as a burst pipe or a devastating fire, homeowners insurance can cover the cost of repairs.
If you want to be compensated, you must file an insurance claim. On average, 6% of insured homes have a claim filed annually, according to ISO's analytics.
But what happens if your claim is denied?
It is crucial to comprehend the reasons for a claim rejection and your consumer rights if you wish to appeal.
Find the best homeowners insurance
Why your homeowners insurance claim was denied
According to the Insurance Information Institute, an insurance company may have various reasons for denying your claim.
No policy in force
If you fail to pay your premiums, your insurance policy may be canceled and your claims rejected. However, the insurer must provide you with advance notice of policy termination, the duration of which varies by state.
Not a covered peril
While homeowners insurance covers various scenarios such as fires and fallen trees, it does not cover all possibilities, like flooding, which needs a separate flood insurance policy.
Neptune Flood Insurance, backed by Lloyd's of London, offers unique features such as living expenses coverage, pool refill and repair, and up to $10,000 in coverage for belongings stored in the basement. CNBC Select has named Neptune as its top flood insurance provider, with high coverage limits of up to $4 million for homes and $500,000 for personal belongings.
Aon Edge offers a $5 million building and contents coverage limit for its excess flood policy, which is available in 48 states. The application process is straightforward with just 12 underwriting questions and no need for photos or elevation certificates.
Other common policy exclusions include:
- Earthquakes and landslides
- Normal wear and tear
- Neglect (including mold, rot, rust and preventable damage)
- Termite, insect or rodent damage
- Damage from war, terrorism or civil unrest
- Intentional damage by the owner
Missed filing deadline
Most insurance policies require claims to be submitted within a year of damage, according to the III. If you delay, your claim may not be approved.
Insufficient documentation
To successfully file a claim, you must provide photos, videos, receipts, and other evidence of your loss. If you fail to provide sufficient proof, your insurer may deny your claim.
Unapproved repairs
It is advisable to wait for the insurance adjuster to assess the situation before undertaking major repairs after an incident.
Fraud
If an insurance company determines that a claim is fraudulent, it will not be covered and may result in the cancellation of your policy. This can occur if you intentionally damage property or provide false or misleading information.
What to do if your claim has been rejected
If your claim has been rejected, there are steps you can take to obtain satisfaction.
Review your policy thoroughly
Before filing a claim, it's crucial to read your policy carefully to understand coverage, entitlements, and the filing process.
If your damage is caused by an excluded peril, you may need to use your emergency fund for repairs. In the event of a natural disaster, you may be eligible for help from the Federal Emergency Management Agency.
Contact your insurance company
Your adjuster should provide a detailed explanation for denying your claim. If you disagree with their decision, contact them to discuss reevaluating or scheduling a home visit.
Gathering documentation, including photos and receipts, and keeping thorough records of all communication can help establish a paper trail when communicating through e-mail.
J.D. Power's 2023 survey ranked Erie Home Insurance as the top choice for property claims satisfaction. Additionally, Erie offers discounts for having multiple policies, installing home safety devices, and obtaining a quote up to two months before your current policy renewal date.
Erie is only available in 12 states and Washington, D.C., and it's not possible to obtain an online rate quote.
Amica is widely praised for its claims satisfaction and is accessible in all states except Hawaii and Alaska. Its Platinum Choice plan offers replacement costs of up to 130% and extended coverage for jewelry and other valuables. Additionally, Amica pays dividends in many states, with returns of up to 20% of your premiums annually.
File an appeal
If your claim was wrongly rejected, your policy should outline the appeal process, which usually has a time limit, so act promptly and provide all necessary information.
Hire a public adjuster
A public adjuster, who is an independent agent hired by the policyholder, can interpret your policy and guide you through the claims process, ensuring that your interests are fairly represented. According to the advocacy group United Policyholders, an adjuster can cost up to 15% of your potential payout. Therefore, you must determine if it is worth the investment.
You can find adjusters through the National Association of Public Insurance Adjusters or your state's insurance regulator.
Ensure the adjuster you hire is trustworthy by requesting references and verifying their license, although some states do not regulate or license public adjusters.
Contact your state's insurance department
If you believe your carrier is in the wrong, contact your state's department of insurance for assistance in filing an official complaint and resolving the dispute.
Hire an attorney
If you've been denied or received an unsatisfactory payout, you may want to consider hiring a lawyer to advocate for you. Some attorneys charge by the hour, while others work on contingency, taking a percentage of the final settlement. The fee for an attorney can vary depending on whether the case goes to trial, with a typical range of 33% to 40% of your settlement.
FAQ
Bottom line
If your homeowners insurance claim is denied, your provider must provide a reason and allow you to appeal the decision. If the issue persists, contact an independent adjuster or your state's insurance office. If all else fails, seek legal representation.
Why trust CNBC Select?
Our goal at CNBC Select is to deliver top-notch service journalism and in-depth consumer advice to our readers, enabling them to make well-informed decisions when it comes to their finances. Each insurance review we publish is the result of thorough reporting by our team of expert writers and editors, who possess extensive knowledge of insurance products. At CNBC Select, we are committed to maintaining our journalistic standards and ethics, even though we earn a commission from our affiliate partners on many offers and links.
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