Drivers need car insurance to protect themselves financially in case of an accident, but that doesn’t mean every single claim will be paid. Some claims just won’t be covered by your policy, while some claims may be incorrectly denied and require you to take further action if you want to receive payment.
There are always some circumstances where car insurance claims will be denied, so it is important to make sure you understand how your car insurance coverage works (and how it doesn’t) so you can plan ahead before filing a claim.
Why are claims denied in car insurance?
Claims can be denied for any number of reasons, but it all boils down to whether or not you have the right types of coverage. Here are a few of the reasons a car insurance company might deny your claim:
1. Your coverage has lapsed
If you don’t pay your insurance premium and your policy lapses, you won’t be covered for any car accidents or damage that happens after your coverage has ended. If you think you may have trouble remembering to pay your insurance premium each month, you can either pay in full at the beginning of your policy or set up auto pay to make sure you don’t let your insurance policy lapse on accident.
2. Your claim isn’t covered by your policy
If you don’t have the corresponding type of car insurance, you won’t be covered for that type of damage. For example, drivers who don’t have comprehensive insurance won’t be covered if their car is stolen, and drivers without collision coverage won’t be covered for damage to their vehicle if they smash into a telephone pole.
3. The damage exceeds your policy limits
Your car insurance only provides coverage up to the limits of your policy. Drivers who choose low levels of coverage and are in an at-fault accident that causes serious damage will find themselves underinsured and expected to pay out of pocket for expenses that go above and beyond their coverage limits. Basically, if your policy only covers you for up to $50,000 in property damage liability, and you owe the other driver $80,500, your claim for that full amount would be denied.
4. The accident involved an uninsured motorist
If you are hit by a driver with no insurance, or worse, a hit-and-run driver, you won’t be able to file a claim with the at-fault driver’s insurance. If this happens, drivers who don’t have uninsured/underinsured motorist coverage will have their bodily injury claims denied and drivers with no collision coverage will have their property damage claims denied.
5. You’re in a no-fault state
Drivers in no-fault states are required to have personal injury protection (PIP) coverage to pay for their own medical expenses after an accident. This means the at-fault driver may not have any bodily injury liability coverage or, even if they do, it may not cover you and your injuries or medical expenses because you are expected to file a claim through your PIP insurance.
6. You broke the law
Your car insurance company can deny your claim if you are in an accident while breaking the law. This applies to big, obvious crimes like robbery and assault, but it also applies to other situations you might not think about, like if you were driving with an expired license at the time of the accident, or if you were under the influence of drugs or alcohol.
Solving a claims dispute
There are several steps you can take if you believe your car insurance claim was underpaid or wrongly denied.
Appeal the decision: You can go through your car insurance company’s claims department to appeal a denial or renegotiate a claim.
Reach out to the state: If your appeal is denied, contact your state’s insurance department and ask to submit a complaint.
Hire a lawyer: You can hire an attorney to help you file suit against your car insurance company, but consider how much it will cost to take your insurer to court before you do so. If the legal fees and attorney costs will eat up most or all of what you might be awarded by a judge, it may not be worth the time and effort.
Frequently asked questions
What is a common reason a car insurance claim could be denied?
One of the most common reasons a liability auto insurance claim would be denied is if the insurance company is unable to determine who was at fault. One of the most common reasons a comprehensive and collision claim would be denied is if the damage wasn’t caused by a covered peril.
Which insurance company denies the most claims?
According to the National Association of Insurance Commissioners (NAIC), the car insurance companies with the most customer complaints are National General, Root, Erie, Liberty Mutual, and State Auto. The majority of complaints against insurance companies center around claims, including denied claims, delays in handling claims, and unsatisfactory claim payments, which means the companies with the highest NAIC complaint index scores likely have the most claim denials.
What are three reasons you can be denied car insurance?
Drivers who have too many accidents or moving violations may be denied coverage. Drivers who own a car that isn’t covered under a standard policy (like a classic or collector vehicle on a standard insurance policy) may be denied coverage. Also, drivers who don’t live in the insurer’s coverage area may be denied coverage.
How often do insurance companies deny claims?
Every insurance company denies some percentage of claims, but how many claims are denied will vary from one company to the next. Also, keep in mind that insurance is regulated at the state level, so an insurance company’s claim denials may be different in one state than they are in another.
