Discovering that your property has suffered damage can be incredibly distressing. However, the situation can quickly escalate from bad to even worse when your insurance company refuses to honor your claim for reimbursement.
There are numerous factors that can lead to the denial of insurance claims. In certain instances, the denial can be attributed to mistakes made by the policyholder themselves.
Here are 7 most common insurance claim mistakes that can cost you a lot of money.
1. Not reading your insurance policy
It is crucial to understand that insurance policies are tailored to individual needs and preferences. Therefore, it is essential for policyholders to have a comprehensive understanding of what their insurance policy covers and excludes.
It should not be assumed that switching to a new insurance company will automatically provide identical coverage to what was previously offered by the previous insurer.
To ensure a clear understanding of your insurance coverage, it is highly recommended to meticulously review every aspect of your policy. This involves thoroughly examining the details of coverages, deductibles, and limits. It is wise to conduct this review well in advance of any potential need to file a claim.
By carefully reading the policy, policyholders can be well-informed about the extent of their coverage and the financial obligations they may face in the event of a claim. This proactive approach empowers individuals to make informed decisions and helps prevent any unpleasant surprises or disappointments in the future.
2. Underinsuring
Insufficient coverage, known as underinsurance, is a prevalent issue that homeowners often encounter. The expenses associated with repairing significant claims can surpass the estimates many homeowners have in mind.
Inflation has played a significant role in driving up the costs of construction, including both materials and labor, in recent years. It is therefore imperative to ensure that your insurance policy provides adequate coverage to replace or repair your home at current market rates.
Moreover, it is essential to consider whether your policy offers replacement cost or actual cash value coverage. Replacement cost coverage ensures that your damaged items are replaced without accounting for depreciation.
On the other hand, actual cash value coverage only reimburses you for the depreciated value of your possessions. Opting for actual cash value coverage may result in higher out-of-pocket expenses for you, as the reimbursement amount may not fully cover the cost of replacing your items.
3. Missing documentation
Prior to disbursing a claim, insurance companies typically require evidence of the loss or damage sustained. It is crucial to gather substantial visual documentation by capturing multiple photographs and/or videos that comprehensively depict the affected area or issue from various perspectives. Ensuring that the images are of high quality and include detailed information is paramount.
By meticulously documenting the damage or problem through visual evidence, you provide the insurance company with a clear and undeniable account of the situation. These visual records serve as crucial supporting documentation when substantiating your claim, as they provide tangible proof of the extent of the loss.
In addition to visual documentation, it is equally important to maintain meticulous records of all interactions you have with the insurance company, adjusters, and any other involved parties.
This includes keeping a detailed log of conversations, emails, letters, and any relevant documentation exchanged during the claims process.
4. Not informing the police
In situations where a law has been violated, such as in the unfortunate events of a burglary or an automobile accident, it is highly probable that your insurance company will request you to promptly notify the appropriate law enforcement authorities.
Although the process of waiting for the police to arrive and completing necessary paperwork may not be enjoyable, it holds significant importance as it contributes additional evidence to support your claim for loss and effectively documents the extent of the damage incurred.
By involving law enforcement, you establish an official record of the incident, which adds credibility to your claim. This record serves as an objective account of the events that transpired and can be invaluable when presenting your case to the insurance company.
It provides independent verification of the incident, aiding in substantiating your claim for compensation.
5. Not questioning insurer’s payout
Insurance managers are prone to making errors. In the event that you find yourself in disagreement with the value that manager has assigned to your insurance claim, it is essential to voice your concerns and take appropriate action.
If you firmly believe that the assigned value does not accurately reflect the extent of your loss, it is crucial to speak up and express your disagreement.
Initiating a conversation with your insurance agent or representative is often the first step towards resolving the issue. They may be able to provide guidance and assistance in addressing the discrepancy.
In some cases, it may be necessary to file a formal complaint regarding the assessment of your claim. By following the established complaint procedure provided by your insurance company, you can escalate the matter and bring it to the attention of the appropriate department within the company.
6. Not filing claims quickly
Timely reporting of any issues or problems to your insurance company is very important to maintain the credibility and validity of your claim. Failing to notify your insurer promptly may raise doubts about the authenticity and seriousness of the situation.
It is crucial to make a prompt phone call to your insurance company as soon as you become aware of an incident or problem, even if it doesn’t initially seem like an emergency.
The sooner you report the issue, the better. In general, contacting your insurer within 24 hours of the occurrence is a wise and advisable approach.
By promptly informing your insurance company, you demonstrate your commitment to complying with the terms and conditions of your policy. It allows them to initiate the claims process promptly and conduct any necessary investigations while the details are still fresh.
7. Filing unnecessary and small claims
When faced with minor damage, it is worth considering whether it is more financially viable to handle the repairs yourself rather than involving your insurance company. This is because filing a claim typically entails paying a deductible, which in some cases can exceed the cost of the actual damage.
In addition to the deductible, filing a claim may have consequences for your insurance premiums. After making a claim, there is a possibility that your premiums could increase in subsequent policy periods. This increase in premiums may offset any potential benefits gained from the claim payout.
For minor repairs or damages that you can manage comfortably within your own budget, it is often wiser to pay for them out of pocket. By doing so, you avoid the financial implications associated with filing a claim, such as higher premiums and deductibles.
