Why Do Car Insurance Companies Deny Claims?

Anna Baluch
Written by
Anna Baluch
Photo of an Insurify author
Written by
Anna Baluch
Insurance Writer
Anna Baluch is a Cleveland-based personal finance and insurance expert. With an MBA from Roosevelt University, she enjoys writing educational content that helps people make smart financial decisions. Her work can be seen across the internet on many publications, including Freedom Debt Relief, Credit Karma, RateGenius, and the Balance. Connect with Anna on LinkedIn.
Danny Smith
Edited by
Danny Smith
Photo of an Insurify author
Edited by
Danny Smith
Insurance Writer
Danny is an insurance writer at Insurify. Specializing in auto insurance, he works to help drivers navigate the complicated world of insurance to find the best possible policy. He received a bachelor's degree from the University of Massachusetts Amherst. You can connect with Danny on LinkedIn.

Updated December 7, 2022

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Unfortunately, insurance claims do get denied on occasion. While some denials happen for legitimate reasons, others can be disputed. Here’s a closer look at car insurance claim denials and what you can do if your claim gets denied.

Reasons car insurance companies deny claims

Car insurance companies may deny claims for various reasons, such as inadequate coverage, policy exclusions, or late claims.

Late claims

You should keep two deadlines in mind when you file a car insurance claim: your state’s statute of limitations for filing a personal injury lawsuit and the deadline your insurance company sets for submitting a claim. If you wait too long to file your claim, your car insurance company could deny it.

Intentional misconduct

If you were driving under the influence of alcohol or drugs at the time of an accident, it’s highly likely your car insurance company will deny your claim. Your claim could also get denied if you were driving without a valid driver’s license or valid car insurance.

No medical evaluation

Even if you think you’re fine after an accident, you should still visit the doctor immediately afterward. Some injuries can take a few days or even weeks to become apparent. Without a medical evaluation and the right documentation, it can be difficult to prove that your injuries were caused by the accident.

Lapsed insurance policy

A car insurance company doesn’t have to approve your claim if you weren’t covered by its policy at the time of the accident. In the event there was a lapse in your coverage, your claim will be denied. Additionally, you may face other consequences for driving uninsured, like fines or a driver’s license suspension, depending on where you live. Always make sure your policy is up to date.

Policy exclusions

When you buy a car insurance policy, the coverages you choose are important. Let’s say a tree branch falls on your car and causes damage. If you didn’t elect comprehensive coverage, your insurance company would deny your claim.

Accident with an uninsured motorist

Most states require basic liability coverage, but not all require uninsured motorist coverage, which protects policyholders who get involved in accidents with uninsured drivers. Let’s say someone crashes into your car but provides fake insurance information or flees the scene. If you don’t have uninsured motorist coverage, your car insurance company may deny your claim.

Inadequate coverage

To save some money on premiums, you can choose a liability-only policy that meets the minimum car insurance requirements in your state. But if you get involved in an accident that injures multiple people or you hit a very expensive car, you may not have enough insurance coverage to pay for the full extent of the damages.

Liability dispute

Sometimes, it’s not obvious who’s at fault for an accident. If your insurance provider doesn’t believe you’re responsible, it might deny your claim and state that the other driver’s insurance company is responsible for covering the damages. Dash cams can offer drivers additional evidence when submitting insurance claims.[1]

Bad faith

Your car insurance company may also deny your claim for what seems to be no good reason in an effort to avoid paying out the claim. This is known as acting in bad faith. Since acting in bad faith is illegal, you can and should take steps to recover your losses (more on that below).

What to do if your car insurance claim is denied

If your claim is denied, it’s not necessarily the end of the road. Here are some steps you can take to appeal your insurance company’s decision.

Ask for a letter from your insurance company

First, if you haven’t already received one, request a letter from your car insurance provider that explains why your claim was denied. When you have this information outlined in front of you, it’ll be easier to understand the denial and build a case for appeal.

Collect evidence

Gather any documentation that can help you prove your case. Helpful pieces of evidence could include photographs, witness reports, medical bills and records, police reports, and videos. It’s a good idea to make copies of these documents so you don’t have to share the originals.

Hire an independent claims adjuster

An independent claims adjuster can offer an objective opinion on a claim. You may want to work with one to help strengthen your appeal.

Write an appeal letter

Your appeal letter should explain exactly why you disagree with your insurance company’s denial of your claim and why it should reconsider its decision. Do your best to provide details and highlight your evidence. You can find sample appeal letters online to guide you in the right direction.

Hire an attorney

If you don’t want to navigate the appeals process alone, you may want to hire a lawyer. They can help you with your appeal letter and increase your chances of success.

What to do if you believe your car insurance company is acting in bad faith

Just like any other business, your car insurance provider wants to maximize profit margins. Although insurers have a legal duty to treat you fairly and reasonably, they might engage in questionable tactics or dishonest behavior to pay out as little as possible. This is known as acting in bad faith. Your car insurance company may be acting in bad faith if it:

  • Denies your claim without explaining why

  • Fails to perform an adequate investigation on your claim

  • Refuses to pay your valid claim

  • Delays paying your valid claim

  • Offers significantly less money than your claim is worth

  • Makes threatening statements

  • Requires unnecessary or unreasonable paperwork to process your claim

  • Refuses your requests for documentation

If you believe your car insurance provider is acting in bad faith, you may want to file a bad faith insurance claim. To do this, it’s a good idea to work with an experienced attorney who can ensure you build the best possible case.

Another option is to file a complaint with your state’s department of insurance, which regulates insurance activity and helps make sure insurance companies are compliant with state laws and regulations. Many states even allow you to file a complaint online.[2]

Be prepared to provide information like the name and address of your insurance company, your policy number, a description of what happened and who was involved, the claim you filed, and the solution you’re seeking.[3]

By filing a bad faith insurance claim, you may be able to recover your initial loss under the policy and any financial losses you experienced as a result of the bad faith actions, emotional distress, attorney fees, or other damages.[4]

Insurance claims FAQs

  • Most insurance claims typically get approved. But if you do face a denial by your car insurance company, rest assured you’re not alone, and know that you can appeal the claim.

  • Whether your appeal will be successful depends on the unique circumstances of the claim. To maximize your chances of a successful appeal, make sure to review your claims denial letter carefully to understand if the damages you’re filing a claim for are covered by your policy.

  • Your insurance company, the laws in your state, and whether personal injuries are involved all influence how long it takes for your insurer to approve your claim. In general, however, most insurance companies have approximately 30 days to investigate a claim.[5]

  • A bad faith insurance claim occurs when an insurer denies a claim for an invalid reason. If you believe your insurer is acting in bad faith, you can file a lawsuit to secure your damages. An experienced attorney can help you file this type of claim to ensure your rights are protected.[4]

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Sources

  1. AllLaw. "Why Car Accident Insurance Claims Are Denied." Accessed December 7, 2022
  2. FindLaw. "Elements of a Bad Faith Insurance Claim." Accessed December 7, 2022
  3. Ohio Department of Insurance. "How To File An Insurance Complaint With The State Of Ohio." Accessed December 7, 2022
  4. FindLaw. "What Is Bad Faith Insurance Law?." Accessed December 7, 2022
  5. Car and Driver. "How Long Does a Car Insurance Claim Take To Settle?." Accessed December 7, 2022
Anna Baluch
Written by
Anna Baluch
Linkedin

Insurance Writer

Anna Baluch is a Cleveland-based personal finance and insurance expert. With an MBA from Roosevelt University, she enjoys writing educational content that helps people make smart financial decisions. Her work can be seen across the internet on many publications, including Freedom Debt Relief, Credit Karma, RateGenius, and the Balance. Connect with Anna on LinkedIn.

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Danny Smith
Edited by
Danny Smith
Linkedin

Insurance Writer

Photo of an Insurify author
Edited by
Danny Smith
Insurance Writer
Danny is an insurance writer at Insurify. Specializing in auto insurance, he works to help drivers navigate the complicated world of insurance to find the best possible policy. He received a bachelor's degree from the University of Massachusetts Amherst. You can connect with Danny on LinkedIn.