A former insurance producer, Laura understands that education is key when it comes to buying insurance. She has happily dedicated many hours to helping her clients understand how the insurance marketplace works so they can find the best car, home, and life insurance products for their needs.

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Leslie Kasperowicz holds a BA in Social Sciences from the University of Winnipeg. She spent several years as a Farmers Insurance CSR, gaining a solid understanding of insurance products, including home, life, auto, and commercial, and working directly with insurance customers to understand their needs. She has since used that knowledge in her more than ten years as a writer, mainly in the insuranc...

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Reviewed by Leslie Kasperowicz
Farmers Insurance CSR 4 Years

UPDATED: Oct 27, 2021

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Here's what you need to know...

  • Insurance companies can deny claims that are presented on your policy for several different reasons
  • Some of the most common reasons for claims denials include: expired coverage, excluded drivers, insufficient coverage, and failure to submit paperwork the claim adjuster requested
  • Auto insurance consumers have rights that protect them against bad faith claims tactics
  • It’s your right to dispute a wrongful claim denial. You can do this by writing your insurance company and providing supporting documents to support your response
  • If you don’t get the response you want from your insurance company, it’s your right to contact the State Insurance Commissioner to file an appeal

There’s nothing more frustrating than filing an auto insurance claim just to receive a denial letter in the mail. After all, you pay your insurance premiums each and every month so that you have financial protection. Unfortunately, some insurance companies try to avoid footing the bill.

Claims denials happen, but they could be the result of a mistake. Before you just accept the fact that your claim isn’t being paid, you should do some research to be sure that there’s nothing that can be done. Here’s your guide to learning what you should do to avoid a denial and what you should do if your claim is denied.

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It’s Your Right to Know Why Your Claim Was Denied

You should never have to guess just why the insurance company denied your claim for damages or first-party medical bills. That’s why all insurance companies notify their claimants and policyholders in writing when making a claims decisions. If you aren’t notified of a denial or there’s no reason, the company isn’t complying with the law.

The Department of Insurance oversees the business transactions for insurers to protect consumers.

Each state has their own Consumer Bill of Rights that explains what an insurer must do when determining rates, canceling a policy, or denying a claim.

Under this bill, it explicitly states that an explanation of a denial is mandatory.

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What are the most common reasons for legitimate claims denials?

Some denials are legitimate. Knowing when the insurer has the right to turn down a claim that you’ve filed is necessary. When you’re equipped with this knowledge, it’ll be easier to avoid having a loss that’s not covered in the future. Here are common but legitimate reasons your carrier might send you a denial letter:

  • You have insufficient coverage on your car insurance policy for the claim that was presented
  • You bought a new car and didn’t add it to the policy before the automatic coverage period for newly acquired vehicles expires 14 to 30 days after it’s purchased
  • You weren’t the named insured on the policy and can’t file a claim
  • The driver of the vehicle wasn’t listed on the auto policy
  • Your coverage lapsed for failing to pay your premiums or provide information requested by the insurer
  • The driver was specifically excluded under the policy
  • The amount of damage claimed exceeds your limits
  • You’re guilty of filing a fraudulent claim

Are there signs that your claim was denied in bad faith?

Less than reputable auto insurance companies may attempt to deny claims to avoid paying money. These kinds of denials are a bad faith insurance tactic and it’s against the law. If you feel like your insurer is has been denied in wrongly, you need to take action.

Here are some signs that your claim wasn’t investigated in good faith:

  • Your claim was denied by your adjuster for no apparent reason
  • The claim adjuster is guilty of wrongful manipulation of the facts or the law and refuses to settle your claim
  • Failing to provide you information that’s relevant to your claim
  • Refusing to negotiate a settlement
  • Delaying the investigation to the process
  • Taking an unreasonable amount of time to pay a claim
  • Misquoting the statute of limitations
  • Using the wrong medical terms on purpose to deny your claim

How to Dispute a Denial

You should take action as soon as you find out your claim has been denied. You can start by contacting your insurer to discuss if there are steps that you can take to change the decision.

Submit mission paperwork to support your claim and ask to speak to your adjuster’s supervisor or manager. Moving up the ladder could help you get some traction.

If going up the chain of command doesn’t work, you might have to take your dispute a step further. Review your policy, check your coverage information, and then start to draft an official appeal.

You will submit this appeal to your state’s Insurance Commissioner where the claim will be reviewed. The last step would be to file a lawsuit for breach of contract if the insurer still won’t settle or negotiate with you.

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How can you avoid a claim denial?

There are some ways that you can prevent the hassle of having to appeal a claims decision. If you’ve ever had to deal with a dispute or an appeal, you know how frustrating it can be.

To save yourself a headache, here are some things that you can do to avoid denials in the future:

  • Don’t file an exaggerated claim or it will be rejected
  • Don’t file a claim for insurance coverage that you don’t have
  • Don’t exclude a driver from your policy that drives your car
  • Don’t increase your car’s value without notifying your insurer
  • Don’t drive under the influence or the carrier could deny injury claims as a result of that bad decision
  • Don’t drive your vehicle when your insurance policy has lapsed
  • Reinstate your coverage as soon as possible if it cancels for non-payment

When you’re a loyal customer, you expect your insurance company to take care of you. Unfortunately, that’s not always the case.

If you’re not happy with the way that your company has handled your claim, shop around. Use an online rate comparison tool, find lower rates, and do business with a company that will offer you protection.

Shop around today by entering your zip code in our FREE price comparison tool!