Reasons Car Insurance Companies Deny Claims

Car insurance companies deny claims for various reasons, including (1) personal negligence, (2) inappropriate coverage, and (3) filing too late.

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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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Joel Ohman is the CEO of a private equity backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He has an MBA from the University of South Florida. Jo...

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Reviewed by Joel Ohman
Founder & CFP®

UPDATED: Sep 15, 2020

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Here's what you need to know...

  • There are several reasons why claims are rejected
  • You can increase your chances of getting your claim approved
  • Steps can be taken if your claim is denied

It can be a troubling experience to discover that a claim filed with your auto insurance company has been denied. Medical bills and property damages can come with incredible price tags and it can be downright scary when your insurance company refuses to help.

Insurance representatives can be very precise when handling a claim. Requirements must be met before a claim can be approved. It is important to completely understand what your specific policy includes in the event that you are involved in an accident.

This article will discuss some of the reasons why car insurance companies deny claims and how you can avoid these pitfalls.

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Reasons Why Car Insurance Claims are Rejected

  • Personal Negligence – If the insurer discovers or believes that the accident occurred while the driver was intoxicated or while allowing an unlicensed driver to operate the vehicle, they will rightfully deny the claim
  • Repairing the Damage on your Own – According to the National Association of Insurance Commissioners, some companies will refuse a claim if the claimant has already repaired the damages prior to contacting the insurance company, even if receipts are kept and costs are documented
  • Not Enough Coverage – When consumers compare different insurance quotes, they may seek ones with a lower premium. However, keep in mind that the cheapest policies render the least amount of coverage. Most states only require drivers to withhold liability insurance that would only protect the other driver in the event of an accident
  • Using Your Car for Business Purposes – According to the Insurance Information Institute, vehicles used for business purposes and are owned by a company must carry a business auto insurance policy for proper coverage
  • Refusing to Cooperate – Getting your claim resolved may require you to do a bit of work on your end. To conduct an investigation, insurance companies may request documents, receipts and various pieces of information. Refusing to provide this information will likely result in a rejected claim
  • Filing a Claim Too Late – If a policyholder does not act quickly enough after an accident, this may create doubt and suspicion with the company
  • Not Following-up with the Representative – A rep may assign you a case number once a claim has been filed. They may attempt to contact you via phone or email to request additional information before they close out the case. It is crucial to maintain follow-up contact with the insurer until the claim has been accepted
  • Lying or Exaggerating the Claim – If a company uses their discretion to determine that a claim is fraudulent or exaggerated, this is immediate grounds for denial. Not to mention that being found guilty of insurance fraud is a serious crime
  • Allowing Your Coverage to Lapse – Missing a payment on your policy could completely cancel out your coverage

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Increasing Your Chances of Getting Your Car Insurance Claim Approved

Gathering as much information as you can at the scene of the accident is vital. This includes the full name and contact information of the other driver and any cooperating witnesses.

Be sure to document the names of any police officers on the scene as well.

If possible, take pictures of all damages, including your vehicle and theirs. Take pictures of license plate numbers and a few pictures of the location of the accident.

The more information you have to support your claim, the more likely the insurance company will accept it.

In regards to bodily injury, the insurance company will request medical records and documented expenses related to the accident. They may also request doctors notes stating how long you should be out of work.

Failure to provide any requested information will likely result in the company refusing to provide compensation.

Remain honest and reasonable. Claim representatives are very skilled at evaluating accident cases.

Fabricating any aspect of your claim will not only get it denied but can make way for an insurance company to file a civil lawsuit against you according to the Insurance Information Institute.

Lastly, make sure you have purchased an adequate policy. A policy that only covers liability will not compensate you for medical bills or the damages of your own car.

Steps to Take if Your Car Insurance Claim is Denied

First and foremost, you must have a valid reason to dispute the insurance company’s decision to reject your claim.

Not having adequate coverage in the first place would not be a reason to make a dispute.

When filing a claim, you need to have all of the necessary documentation to have your claimed approved.

Consider these steps in an effort for the company to revise its decision:

  • Understand the exact reason why your claim was not accepted
  • Write a letter (or perhaps an email) thoroughly explaining why their decision was unfair. Provide additional documentation and proof if possible
  • Contact the National Association of Insurance Commissioners to appeal the decision
  • Contact an attorney for legal assistance in filing a lawsuit against the company

The Bottom Line

When shopping for car insurance, it is important to fully understand the coverage involved with the policy.

Take the time to review the fine print and ask questions if needed.

To ensure that your claims are successfully compensated for, make sure you adhere to the companies policies and regulations at all times.

If you feel as though an insurer has denied your claim out of bad faith, there are many resources available to assist you in disputing their decision.

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