Why Do Insurance Companies Deny Claims?
When you purchase an insurance policy, you expect it to provide the coverage you intended it for. However, insurance policies are complex legal documents that include numerous exclusions and limitations to coverage. For people making liability claims against another person's insurance policy, there are also legal principals that can lead to the denial of a claim.
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Policy Exclusions
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Insurance policies contain many limits and exclusions that can cause an insurance company to deny a claim. For instance, homeowner's insurance policies provide coverage for damage caused by water leaks in your plumbing, but may exclude coverage if the leak occurred over a period of weeks. Most life insurance policies will exclude coverage if the named insured commits suicide during the first two years that the policy is in effect. Health insurance companies often exclude coverage for medial procedures it considers experimental. It is important for you to read your insurance policies to familiarize yourself with its exclusions.
No Liability
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When you make a liability claim against someone else's insurance policy, the insurance company will conduct an investigation to determine if its policyholder is legally liable for your damages. When liability is in dispute, the onus is on the claimant to prove the policyholder was negligent, not for the insurance company to prove the policyholder was not negligent. If you are unable to prove the policyholder was legally liable, the insurance company is within its rights to deny your claim.
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Fraud/Misrepresentation
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All insurance policies contain provisions that allow an insurance company to deny an insurance claim if the claimant commits insurance fraud. Insurance companies usually have a special investigations unit that investigates claims when it suspects an insured is committing fraud. Even if it company can only prove that the insured misrepresented a portion of a claim, the insurance company has the legal right to deny the entire claim. Claimants who commit insurance fraud are also subject to criminal prosecution.
Policy Rescission
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When you complete an insurance application, the insurance company relies upon the information you provided when accepting the application and calculating the premium. If the company discovers after you file a claim that you provided false information on the application, the insurance company may have the legal right to rescind the policy and deny the claim. For instance, if you apply for life insurance and fail to disclose that you have a history of heart disease, the insurance company can deny the life insurance claim to your beneficiaries if it later discovers this information.
Statute of Limitations
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When you file an insurance claim, you have a limited amount of time to settle your claim or file a lawsuit. The amount of time you have depends on the state in which the loss occurred. For instance, in California the statute of limitations for bodily injury claims is two years from the date of loss. If you fail to settle the claim or file a lawsuit within that time period, the insurance company has the legal right to deny any payment for the claim.
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