Homeowners insurance is one of the most important coverages you should have as a homeowner. It protects your property against damages by covering the repair's financial cost.
Despite homeowners insurance offering an effective mechanism for covering property loss, making claims remains one of the most challenging parts for homeowners. According to research, only 47% of homeowners have an updated inventory of their possessions that can help document losses during claims.
If you don't document your possessions, you risk being denied your claim if your property gets damaged by an insured cause. If your homeowners insurance claim gets denied by your insurer, you can respond by asking for a review of the reason for denial, hiring a public adjuster, filing an appeal, or filing a formal complaint.
Here's a deeper look into why homeowners insurance claims get denied and what you should do if you find yourself in this situation.
Why Insurers Can Deny Homeowners Insurance Claims
Insurance companies can deny homeowners insurance claims for various reasons. Here are the most common ones.
The Event Causing the Damage is Uninsured
Homeowners insurance typically covers theft and damage caused by specific events such as smoke, fire, hail, and lightning. Therefore, your claim may be denied if the event that caused damage to your property is not part of the insured events in your policy.
For instance, flood damage caused by hurricanes or heavy rains is typically uninsured by most standard homeowners insurance policies. Most insurers require you to buy a separate flood insurance policy.
Earthquake damage is also often excluded from homeowners and renters insurance policies. However, you can purchase additional earthquake insurance, especially if you live in an earthquake-prone area.
Most homeowners insurance policies also exclude acts of war and nuclear accidents from coverage. However, the U.S. government mandates nuclear power plants to hold liability insurance that covers property damage to third parties surrounding the plant in case of a nuclear event.
You Didn't Make Temporary Repairs After the Damage
Insurance companies expect that you make temporary repairs to your property in case of damage to prevent further damage from occurring. If you fail to make temporary repairs, any further damages may not be insured after the event.
For instance, if a window breaks in your home and you don't cover it with a piece of wood or tarp, you can be held liable for any water damage due to the interior being exposed to harsh weather elements.
You Filed the Claim Late
Insurance companies offer a time limit for filing a claim against your homeowners insurance policy in case of property damage. Therefore, taking too long to submit your claim can lead to a denial.
You can find the timeframe for filing a claim for your specific policy and insurance company within the policy's terms.
Insufficient Documentation
When you claim property damage, especially claims including luxury or state-of-the-art items, the insurance company will want proof that you bought these items and their value.
Therefore, you must maintain a home inventory listing all your possessions. This inventory should include as many details as possible about each set or item, including model names, brand names, purchase dates, receipts, photos, and serial numbers.
If you don't have this inventory when damage occurs, you can retrieve it or build one from old emails with receipts, credit card statements, or other verifiable sources. This includes your smartphone, where you can retrieve recent photos showing the condition of your home and possessions.
You can get these photos from friends, too.
Damage Occurred to Undisclosed Improvements
Your insurance company must know of any additions or remodeling you make to your home. Otherwise, they may fail to fully cover the home in case of any damages. These improvements include flooring and cabinet upgrades.
You should inform the insurer about the upgrades as soon as you complete them. This may lead to a minor increase in rate or premiums, but you will get additional coverage for these new improvements.
The Property Was Neglected or Poorly Maintained
Most homeowners insurance policies require that you maintain your property with reasonable care. Therefore, if evidence suggests that the damage was caused by neglect or poor maintenance, such as a burst pipe, ruptured water heater, or failure of an appliance or system you should've maintained, your claim may be denied.
You should provide inspection and maintenance reports and records to demonstrate that you kept your property in excellent condition to avoid your claim being denied.
What You Should Do When Your Homeowners Insurance Claim is Denied
Having your claim denied by your insurance company can be very frustrating. Here's what you can do when in this situation.
Review the Reason for Denying Your Claim
After receiving the information that your homeowners insurance claim has been denied, you should first review the letter the insurer will send explaining their decision.
Insurance companies must explain their reasons for denying a claim in writing. The letter must include specific language from your policy and the findings from the adjuster who inspected your property.
If the claim was denied based on inaccurate information, you should proceed immediately to point out these errors. Ensure you've gathered enough data and evidence, such as before and after photos of your home, receipts, and repair estimates.
Hire a Public Adjuster
A public adjuster is your best bet at lodging a successful appeal against a denied homeowners insurance claim. Public adjusters are licensed professionals who negotiate with insurance companies on your behalf.
The adjuster will receive 5% to 15% of the claims payment if the appeal is reviewed and accepted. Otherwise, they'll receive nothing.
You can also hire a public adjuster if the insurance company offers a low settlement.
Avoid public adjusters who ask for payments in advance. Moreover, you can confirm their license status through your state insurance commissioner's website.
File an Appeal
If the insurer and their public adjuster do not understand your position when you explain it, you must file a formal appeal. You'll have a limited time to do this, with the time allowance starting once your claim is denied.
Your homeowners insurance policy will outline the appeal process you should follow, which will trigger a review of your denied claim. Ensure you present as much evidence and documentation as possible to increase your chances of having the denial overturned.
File a Formal Complaint
Insurance companies are heavily regulated. If you are a policyholder in good standing with the company, with all your premiums paid, the insurance company must process your property claim fairly and based on merit.
If the insurer fails to offer you this minimum benchmark, you can escalate the issue through a formal complaint to the state's insurance commissioner.
Talk to a Professional About Your Homeowners Insurance
Homeowners insurance is meant to give you peace of mind about your home and property within it. Talk to an insurance expert today about the best policy you should take and how to avoid claims denial in case disaster strikes.