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Can a car insurance company refuse to pay a claim?

Important facts to know...
  • Your car insurance provider is there to help you recover from losses above and beyond the norm
  • There are situations where they may decline to settle a claim, and their reasoning may be completely valid
  • If you have not been paying your premiums or your policy has lapsed, then they may not pay your claim
  • Additionally, if you do not carry the coverage your claim would be covered under, your provider is not obligated to pay out that claim
  • Also, if your provider suspects that insurance fraud may have occurred, they may hold off on settling a claim until an investigation is complete

Filing a claim with your insurance provider often seems like a simple process. However, if you are informed your claim is not being paid, you may begin to question the reason for their decision.

While it may not seem reasonable, there are several completely valid reasons why your insurance company may refuse to pay your claim.

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If You Have Not Paid Your Premium

One of the most common reasons your claim may not be paid is for a failure to pay your premium. What this means for you is that you need to pay your insurance premium to your provider at the agreed upon intervals for your coverage to remain active.

If you have not been paying your premiums or your policy has lapsed due to non-payment, your provider is not obligated to settle your claim.

Your insurance premium is your prepayment for the expectation of future losses.

You pay this amount to your provider in exchange for the services they render during a loss, so if you have not been paying this amount to them, they are not required to help you recover from any losses during the period of non-payment.

For example, if your premium is due on the first day of each month, your provider may give you a grace period.

If you do not pay your premium for three months in a row, they may decide to suspend your coverage, making the suspension date retroactive to the first time you missed your premium payment.

This means that any incident that occurs during those months would not be covered.

If You Do Not Carry the Correct Coverage

Another reason that your provider may not pay out a claim is if your policy does not carry the correct coverage options. Your insurance policy is made up of multiple different options for coverage, such as the following:

If you decide not to carry comprehensive coverage, then your premium payments may drop down slightly. This is because your provider will no longer be required to provide coverage if you experience a loss that falls under this category.

What this means for you is that any claim you file that would normally be considered a loss under this coverage is now solely your responsibility to pay for.

For instance, if you are driving at night and a deer jumps in front of you, there may be little time to stop. Damages caused by animals are normally covered under comprehensive coverage.

Due to this, your insurance provider may decide that your claim is not warranted under your current policy.

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If They Suspect Insurance Fraud Has Occurred

One of the more uncommon reasons that your insurance company may decline to settle a claim is in cases of suspected insurance fraud.

Any action that could be perceived as a deliberate deception could be considered insurance fraud; these actions may also void your policy terms or any potential claims.

When you first set up your policy with your provider, they will often ask a series of questions about you, your household, anyone living in your home, and your vehicle.

This is in addition to the information they gather including:

  • your previous insurance history
  • driving record
  • history of claims

If you were to knowingly provide them with inaccurate or falsified information during this process, it could constitute insurance fraud.

For example, during the quoting process, your provider will often ask about the members of your household.

If you currently have another licensed and legal driver living with you, your provider may require them to be listed on your policy; potentially increasing your premium as well.

If you omit this information when prompted, this could constitute an act of fraud.

This becomes a bigger problem if that driver is involved in an accident. If a claim is filed under your insurance for that driver, your insurance provider may get additional information about them.

If they determine that you omitted this driver’s information when they initially asked for it, your provider could determine that the claim should not be covered due to the omission. They may even determine it is an act of insurance fraud.

Assessing Your Current Coverage

Working with your insurance provider before, during, and after a claim is essential to reaching a resolution that works for you. However, there are situations that can arise where your provider may not feel that paying the claim is appropriate.

To avoid these, it’s important to keep a few points in mind.

Always pay your insurance premium on time. If you do not think you can make your payment, speak to your provider ahead of time to see what options they offer.

Also, review your coverage at least once per year. It’s important to carry the right amount of coverage for your budget and your needs. If you do not carry coverage for vehicle collisions, then you cannot expect your provider to pay out vehicle collision claims.

Finally, avoid any actions that could constitute insurance fraud.

When your provider asks you for details about your household, your vehicle, or yourself, make sure you are honest.

If you are not sure about the information you are providing, make sure to tell them about this up front, following up with corrected information as needed.

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