If your homeowners’ insurance claim is denied, you’re probably seeing red. After all, you pay the insurance company a good amount of money each year, and when you have what you feel is a legitimate claim, you want it paid. When you receive a home insurance claim denial letter, you do have options, and you can dispute it.
TL;DR (Too Long; Didn't Read)
When you receive a home insurance claim denial letter, you do have options to dispute it, such as filing an appeal or entering arbitration.
Policyholder vs. Insurance Company
Disputes between policyholders and their insurers are fairly common. As a policyholder, you want your claim paid because you faithfully pay your premiums, while the insurance company’s business plan means it wants to pay out as little in claims as possible. That doesn’t mean the two sides are always pitted against each other. You can dispute your claim and may receive a decision in your favor, but you must do your research first.
Review Your Policy
It’s important to understand your policy and the extent of your insurance coverage. For example, standard insurance policies don’t cover flood or earthquake damage. For these, you need specific – and generally expensive – policies. You may discover that your policy gives you cash value, not replacement value, for ruined items. Even if the damage to your home is covered under your policy, there are monetary limits to the amount of coverage. The insurance company will also impose deadlines for filing a claim. If you do not meet these deadlines, they have the right to deny your claim. If a review of your policy indicates that you appear entitled to your claim, you have further fuel for your dispute.
The home insurance claim denial letter will likely include language outlining the reason for the denial. If it cites some type of exclusion on the policy, contact your insurer and ask them to clarify exactly where in the policy such an exclusion exists.
Make Sure to Document Everything
Once you decide to dispute your insurance claim denial, it’s vital to document every contact between you, the insurance company and the claims adjuster. Contacting these parties exclusively via email is one way to document the process, and if you speak to a representative by phone, make sure to take notes during the conversation. Follow up all phone calls with an email outlining the gist of the information received. Do the same if you speak to an adjuster or another representative in person.
It’s wise to document your belongings long before a catastrophic event occurs, whether that involves a natural disaster, fire or burglary. Keep records of major purchases in a safety deposit box and take photos or videos of your property and store them online. That way, you have proof of what your property, real or tangible, looked like prior to the event for which you are making a claim. By the same token, photograph the damage as soon as possible after the occurrence. When you suffer a major disaster or trauma, taking pictures probably isn’t the first thing on your mind, but it is absolutely critical to do so.
If the damage to your home forced you to seek temporary lodging, save your motel receipts. The same holds true if you had to purchase items needed to secure your home, such as plywood to put over broken windows.
File an Appeal
You can file an appeal on the initial decision by the claims adjuster. When filing this appeal, make sure to include the photos and other evidence that boost your case. You may want to obtain witness statements and include proof that you had regular maintenance performed on your home. Insurance companies may cite homeowner negligence when denying some claims. Evidence that you were not negligent in the upkeep of your home, such as proof of smoke alarms or some type of security system, can help your case.
Consensus on Damage
Disputes often arise because the claims adjuster says that the house received a certain amount of damage that will cost a certain sum to repair, while contractors are telling you the damage is far more extensive and costly. If you think the home insurance adjuster estimate is too low, request that the claims adjuster visit your property again. Arrange a meeting between the claims adjuster and other professionals you have contacted who differ on the extent of the damage or cost of the repairs. When the claims adjuster hears from professionals, who can point out how the damage differs from the adjuster’s original report, it is possible the adjuster will realize they underestimated the damage, repair cost or both.
Get an Appraisal
If the claims adjuster doesn’t change his opinion, you may submit a request for a written appraisal to your insurance company. Keep in mind, the insurer can also submit such a request to bolster their argument. No matter how makes the request first, both parties will pick an appraiser and pay that professional. The two appraisers, representing different entities, choose a neutral third party to serve as “umpire.” If the appraisers agree on an amount, the insurer should pay it. If the appraisers don’t agree, that’s where the umpire comes in. She will review the differences between the two appraisers. If the umpire agrees with one of the appraisers, the agreed upon amount is what the insurance company should pay.
Home Insurance Arbitration
Arbitration is another option for homeowners involved in insurance company disputes. In this process, several arbitrators listen to the evidence on both sides and make a decision. Home insurance arbitration is either binding or non-binding. If you agree to the former, the decision by the arbitrators is final and both sides must abide by it. If the decision is non-binding, you or the insurer can reject the arbitration decision.
Mediation is another possibility, although it is a less formal procedure than arbitration. With this method, a mediator works with both parties and attempts to reach a settlement they can both agree upon.
State Insurance Department Complaint
If you’re not getting anywhere with what you feel is a valid insurance claim, you can file a complaint with your state’s Department of Insurance. These agencies are tasked with investigating complaints against insurers. A state insurance company representative can also review your policy to see if your claim should have been covered. If the state insurance department decides your claim has merit, it can help you with insurance company negotiations.
Filing a Lawsuit
It doesn’t make sense to file a lawsuit for most home insurance disputes, as the amounts involved are generally too low to make litigation worthwhile. However, if the amount in dispute is significant, it may make sense to contact an attorney and sue the insurer if other methods to reach a settlement have failed. An experienced attorney specializing in insurance disputes can often reach a fair settlement when others have failed, especially because the insurance company probably does not want to go to trial. Remember that the attorney receives a contingency fee, which may mean receiving up to 40 percent of the settlement.
If the amount is small, that doesn’t mean you’re out of luck. You could take your case to small claims court, where you represent yourself. The process is simple and relatively inexpensive, and there is a chance the judge will rule in your favor if you have sufficient, persuasive documentation proving the insurance company should have honored your claim.
A graduate of New York University, Jane Meggitt's work has appeared in dozens of publications, including PocketSense, Zack's, Financial Advisor, nj.com, LegalZoom and The Nest.