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Claim denial? What now?


What determines if a claim is paid (or not)?

You may believe the insurance company decides a claim based on customer loyalty, or claims history, or whether the client has a bunch of rental properties that the agent really wants to write.

Its actually none of these things. A policy is a written contract and claims can be understood by simply reading the policy language. For example, my homeowners policy has a written exclusion for flood damage. The wording may be different on my policy versus someone else's but this is a common exclusion on a homeowners policy. It doesn't really matter how long I've been with the company or if I've never filed an insurance claim before, or if I've had the same policy for 30 years, or my lender told me I don't need flood coverage. My policy does not and will not cover flood damage because that is what is written. Make sure you read the whole policy.

So is there any use in talking with a claim adjuster even when they've decided to deny a claim? Yes of course!

First lets talk about what kind of policy we are looking at. Policies are generally broken down into two categories:

  1. Named Perils
  2. Open or Special Perils

The first category (Named Perils) is pretty easy to understand because the policy language simply says "here are a list of things we cover, and thats it!" These types of policies usually deal with portable items like contents coverage on your homeowners, renters, or condo policies. There isn't much wiggle room here but an excluded event may actually be the direct result of a covered event and may actually be covered. Read the whole policy.

The second category (Open Perils) is my preferred type of coverage because the policy starts off with a bold statement such as "You are insured for direct physical loss to your residence premises." Woah! Now thats the kind of language that gets me fired up! Thats so broad you could argue that covers just about anything that happens to the home!

Unfortunately, the contact continues and begins to state what they won't cover. In the insurance world, if a contract is ambiguous and there is no precedent, the policy language tends to favor the insured not the insurer. So the policy contract lists limitations, exclusions, restricitions, take backs, give backs, add ons, endorsements, etc. But the key is, there was coverage BEFORE the exclusion. So when dealing with a claim that is being denied, remember that the coverage started out by being broad and its up to the claims adjuster to prove an exclusion applies. In other words, read the whole policy.