Stop Getting Denied: 7 Real Reasons Your Insurance Claim Gets Rejected and Exactly How to Beat Each One
You were paying on time your premiums over years. And then something evil lastly occurred and you made a claim. But they did not receive assistance and received a rejection letter. That is worse than the loss itself, right?
Here’s the frustrating truth. In the United States, there is almost 1 in every 5 claims that are denied in annual health insurance claims. The same is the case with auto and homeowners claims. Most of the time the things that lead to the rejection of your insurance claim are as simple as mistakes that you can actually avoid. The majority of the population never gets to know this until it is late.
The 7 most common refusals of your claim by insurers are broken down in this article. Better still, you will know precisely what to remember that your next claim will pass without a struggle. Let’s get into it.
Why are Insurance Companies Rejecting the Claims in the First Place?
And then, before we come to the particular causes, it is worth discussing why denials occur so frequently. The insurance companies are not charity. They have a business, and whenever they make a claim, they are losing their profits. That does not imply that they are out to rob you but it implies that they seek justifiable reasons to reject claims.
The majority of the rejections occur due to the disjunctures between your expectations on one hand and what your policy covers on the other hand. You may think that it is part of something however the small print tells you otherwise. The key to making big leaps when making claims is to know how insurance works in the first place.
The good news? A vast majority of the denials can be avoided. QA Kaiser Family Foundation conducted a study that revealed that policyholders who dispute denied health claims are successful only about 40-60 percent of the time. That informs you that there should have been a lot of rejections that should not have taken place. The best weapon in this is knowledge.
Reason 1: You Have Not Read the Policy Exclusions.
This is the most common cause that makes people be caught unawares by a claim rejection. The insurance policy contains a list of items not covered by the insurance policy. These are what are referred to as exclusions and they are hidden in the depths of the policy document that most people will never look at.
As an example, you are likely to be free of flood damage in your homeowners policy. Some of the elective procedures may not be covered in your health plan. There is a possibility that your auto policy would not cover you in case you were rideshare driving. In all policies these exclusions are found and are strictly carried out by insurers.
The majority of the population is unaware of the existence of exclusions until they make a claim and are refused. It is the last thing you want to know. You can also get to know what an exclusion in a policy is actually, in order not to be taken by surprise.
How not to do that: Read your whole policy when you are not in need of it. Particularly concentrate on the section of exclusions. In case something is not provided or said, request your agent to add a rider or endorsement. It may require an addition of a few dollars monthly, but it is better than complete denial in the event of a disaster.
Reason 2: Submission of Your Claim Late.
Timing is everything more than people think. All policies have a time limit within which claims are filed. Fail to do so and your insurer is allowed by law to reject your claim even when it is entirely valid. This is among the most prevalent reasons that your insurance claim will be rejected, and it can be avoided completely.
Majority of the auto insurance policies will have you reporting the accidents within 24 to 72 hours. Filing window of health insurance claims varies between 90 days and one year. Homestead claims are usually supposed to be filed within a reasonable time which is usually within few days of the occurrence.
An accident or a loss makes life busy. You are talking of stress, repairs, check-ups, and documentations. Making a claim may go down to the bottom of your list. That a day wait offers more reason to the insurer to refuse you.
How to prevent this: Inform your insurer about the incidence as soon as possible even before you have all the facts. It is always possible to add the information later. The most important thing is to initiate the claim in time within the deadline of the policy. Add an alarm on your cell phone. Just don’t wait.
Reason 3: Documentation that is not complete or not correct.
Your insurance claim should be thought of as a court case. You need evidence to win. The insurance company will work against you in case of your sloppy, missing or erroneous documentation. The number of insurance claims that are denied because of incomplete paper work is among the leading causes of insurance claim denials in all kinds of policies.
The most frequent errors in documentation are lack of receipts on damaged goods, inadequate photos on the damages, incorrect policy number on the claim form, and unfilled mandatory fields. Minor mistakes, such as a misspelled name or incorrect-date can be used to cause a rejection. Insurers review thousands of claims on a daily basis, and they are strict on checklists.
That requires appropriate diagnosis codes, referral letters, and pre-authorization approvals, in the case of health insurance claims. In the case of auto claims, you require police reports, estimates of repair, and multifaceted photos. In the case of homeowners claims, you should have a list of home inventory, contractors estimates and ownership.
How to prevent this: Prepare a claim file prior to the time that you need it. Store receipts of high value purchases. Also take pictures of your home and belongings on a yearly basis. Look up all fields on the form when making a claim. Send in excess documentation to what you consider necessary. It is better to over document than under-document.
Pro Tip: Have an online album of your house, car and treasures on your phone. Update it every six months. This evidence vault will save your claim in case of something happening.
Reason 4: Your Policy was lapsed because of missed payments.
This one is so self-evident, and it traps more people than you might imagine. When you fail to make a premium and your policy lapses, you have zero cover. Every claim filed in the course of a lapse period is automatically rejected. One can never talk your way out of this one.
The insurance companies normally grant you a grace period of time within which to cancel your policy. In the majority of policies, this period is 10-31 days late on the missed payment. Under this grace period, you are covered but you have to pay the premium outstanding. When the grace period is up, you are dead with your policy.
Knowledge on grace periods in insurance premises can actually save you a lot of money to the tune of thousands. Nobody is aware of the existence of grace periods and they panics and believe that they are automatically uninsured once they miss a single payment. It is not normally so, however, there is still a need to do it as soon as you can.
How to prevent it: Have your insurance payment automated. Assuming that you are unable to do auto-pay, make a schedule reminder every time you have to pay. When you are strained on finances you can call your insurer before you default on payment. Numerous businesses have payment schemes or short-term hardship programs. They would prefer to do business with you and not to lose a customer.
Reason 5: The Damage Preceded or occurred over a period of time.
Insurance is provided on sudden and accidental incidents. It does not even cover what was already broken by the time you had taken the policy. Neither does it address the damage accrued gradually. A great number of homeowners and insurance claims to health insurance fall into this trap.
In this case, say you had a leaky roof over the last three years and it caved in, subsequently, your homeowners insurance company will turn down the claim. They will claim that the damage was not immediate and you ought to have ensured that the roof was well maintained. Likewise, health insurers tend to reject claims on conditions that had occurred prior to the date of the policy commencement even though the Affordable Care Act has curtailed this trend in relation to marketplace plans.
The same can be said of auto insurance. Your transmission would not have fallen due to breakdown prior to the beginning of your policy, and hence you cannot claim it later. Insurers dispatch adjusters to examine and such individuals are aware of how to tell when there is already damage. Attempts to imply one through them are seldom effective and may even trigger the cancellation of the policy or criminal accusations.
Prevention strategy: Disclose any conditions, damage or problems you have on your application. Before purchasing homeowners insurance have a house inspected. In the case of health insurance, you should be knowledgeable of how the rules of pre-existing conditions apply to your particular plan. Above all, keep you property in good condition. Repair minor issues before they turn out to be major. Insurance is not a thing to avoid.
Reason 6: You Have Not Received Pre-Authorization You Required.
This motivation is found in health insurance claims, but appears in others as well. A lot of insurance policies will also insist that you will have to be approved before you are given some services. Failure to comply with this step has the effect of the insurer knocking off all the claim leaving you with the hefty bill.
In the case of health insurance, pre-authorization is usually applied to surgeries, MRI, visits with a specialist, and costly medications. This is normally done by the office of your doctor although not always. There are doctors who will assume that the patient will do it. Miscommunication is a cost of thousands of dollars.
In some cases homeowners insurance may insist on approving some of the repairs. Auto insurance may require pre-authorization prior to you visiting a certain repair shop with your car. The regulations are policy dependent and thus there is no universal solution to this. You will have to read your individual policy or dial your agent.
Prevention: You must contact your insurance company directly before any major procedure in the medical field. Enquire about the need of pre-authorization. Get the consent in writing not an oral yes in phone. Record all the discussions made and the name of the person you talked to and the date. This paper trail will defend you in case the insurer will argue in future that you did not receive approval.
Reason 7: Fraud on Your First Application.
This is one of the reasons that may haunt you many years after taking the policy. In case you lied or even made mistakes in providing information on your insurance form, then the company is able to refuse your claim. They can in other instances annul the whole policy and reject all the claims you ever brought forward.
This is referred to as material misrepresentation and an insurer takes it seriously. Examples of lying include telling a lie on a life insurance application, failing to tell the truth on your auto application, misrepresenting the size of your house, concealing a former accident, or a health problem on a health insurance form.
All these mistakes are not identified by insurers during application. They can find them when conducting the investigation of claims. Once they do the consequences are drastic. You lose the coverage, your claim is denied and you may even get into trouble with the law. The unspoken rules to an insurance policy are clauses that entitle the insurers to check on your application anytime.
Prevention: The first thing to do is to be honest on your insurance form even when doing so may raise your premium. In case you notice that you made a mistake after posting it, contact your insurer and amend it as soon as possible. Being honest could cost you an extra few dollars a month but it will ensure your claims are not tossed out in future.
Comparison in a glance: Insurance Type Denials of common claims
| Denial Reason | Health Insurance | Auto Insurance | Homeowners Insurance | Life Insurance |
|---|---|---|---|---|
| Policy exclusions | Very Common | Common | Very Common | Common |
| Late filing | Common | Very Common | Common | Rare |
| Incomplete documents | Very Common | Common | Common | Common |
| Lapsed policy | Common | Very Common | Common | Very Common |
| Pre-existing damage | Common | Moderate | Very Common | Very Common |
| No pre-authorization | Very Common | Rare | Rare | Rare |
| Misrepresentation | Common | Common | Common | Very Common |
What to Do in case your insurance claim is denied.
Being rejected does not mean it is time to quit. Most insurance claims rejections appealable to you. Most individuals jump ship when they are denied the first time and this is not right. As we have already said, a high number of appeals is successful.
Begin with reading of denial letter. It must indicate the reason as to why your assertion was denied. 1. Find the particular policy chapter that they are referring to. In other cases the insurer is wrong and just by pointing it out one can get the claim passed. Determine whether the denial qualifies under any of the reasons we have discussed above.
Then, find some more papers to prove your point. Ask another contractor, doctor or repair shop to give a second opinion. Prepare a formal letter of appeal, which covers each aspect in the denial. Incidentally, add all supporting evidence. In case of failure of your appeal, you have the option of filing a complaint with the Department of Insurance linked with your state. Each of the states possesses a regulator who oversees insurance companies and receives consumer complaints.
Another option would be to hire a public adjuster or an insurance attorney. These are experts involved in the struggle against rejected claims. Their compensation is normally contingent, that is, they are paid when you win. This may be a good investment in large claims worth thousands of dollars.
How to Prevent Future Claim Rejections Starting Today
It is time to change the focus to prevention of problems instead of fixing them. These are some of the few habits that can help prevent a denied insurance claim in the future by a significant margin. These measures require little effort and enormous protection to the rescue.
The first one is to revise your policy annually. As your life changes so does your insurance needs. There may be a policy that you purchased five years ago and it may not be applicable to the situation you are in. Have an agent conduct an insurance checkup at the beginning of each year. Ensure that your cover limit remains the same as your requirements and assets. Whether or not you should continue making premiums or save the money in cash rather than a claim on insurance can be resolved by this guide on how to use cash reserves or insurance claims.
Second, keep records on all that you possess. Keep receipts, take photographs and have a home inventory spreadsheet. Keep these files on the cloud in order to survive even when your house does not. Your assertions are impregnable in this documentation and the whole process is hastened.
Third, develop the rapport with your insurance agent. Calling them when something is bad is not enough. Check in periodically. Enquire on what is covered on you. An agent will point out on possible gaps and turn them into an issue. They also have the capability to represent you when filing the claims.
Fourth, learn how to distinguish among types of coverages when you are not in need. Being aware of the fact that you require either a liability cover or a collision cover is likely to save you the hassle of making a claim that is of the wrong category and which is usually denied.
What It Costs to Have a Denied Claim.
We can speak about numbers a little bit because a claim denial is not an inconvenience only. it is a punch in the gut financially. The insurance information institute states that the average value of homeowner insurance claim is approximately 13,000. What happens is you lose that money because you submitted three days late or had a lapse in memory to get pre-authorization.
Even worse than that, in the face of health insurance denials. Single surgery, not covered by insurance, would be costing between 50,000 and 200,000 dollars. A moderate car damage and injuries claim may cost an auto accident claim of between 10000 and 30000 dollars. These are not amounts that most families can afford out of such.
In addition to the financial blow that will occur on the spot, a rejected claim has a ripple effect. You might go into debt. You may put off medical care that is required. You can spend months of your life in a damaged house. The stress itself is straining, health-wise and relationship-wise. It is all that makes prevention immensely precious.
Mistakes when Making a Claim Denied.
The majority of the reactions to a denial of claims are in one of two forms. They either surrender instantly or they lose the temper and begin shouting at customer care attendants. Neither approach works. Smart claimants approach this process calmly and strategically and it has a significant success rate in terms of being successful at the stage of appeal.
Do not take a verbal refusal in its stride. A denial should always be requested in writing with proper reasons. Never sign a contract that is sent by the insurance company without reading it. There are release clauses in some of the documents that do away with your right to appeal. Do not also write about your claim in a social network. Insurers periodically keep track of the accounts of the claimants with conflicting evidence.
Do have all communication in order. Save emails, date and name of phone calls and keep a copy of all the documents you send. Do not miss any deadline that the insurer provides you with appeals. Ask your state insurance department to assist you in case you find yourself struggling. These little things help and shift the balance of power to your side.
FAQ: Denied Insurance Claims Answered
You have listed the best reasons as being policy exclusions, late filing, incomplete documents, lapsed coverage, pre-existing damage, missing pre-authorization and misrepresentation on your application.
A: Yes. Formal appeal process is present in nearly all insurance companies. Another option is to go up to your state insurance department in case the company refuses to accept your appeal.
A: It varies by policy. The average time spent on auto claims is 24-72. Health claims are under 90 days to one year. Any claim by homeowners must be submitted within days.
A: Denied claim does not tend to have an impact on your premiums. Nevertheless, the original filing may remain on claims databases, which may be viewed by future insurers.
A: In big claims, above $10,000, it can usually be economically viable to employ an attorney or public adjuster. A significant number of them are based on a contingency basis meaning that nothing is paid initially.
A: They are not obligated to cancel on the part of mid-term because you lodged a claim. But they may decide not to renew your policy after the expiry of the term particularly when you make more than one claim.
A: Denied claim will have a payment of zero. Partially paid claim refers to the payment that the insurer made covering certain expenses but lowering the amount paid because of deductibles, coverage limits, or amounts of disputes.
Get Control over Your Insurance Claims
It is exasperating when an insurance claim gets denied but it can almost always be avoided. You are now aware of the largest seven pitfalls that lead to denials and how each of them can be avoided.
- Read your policy exclusions prior to you having to make a claim of any kind.
- It should file claims as soon as any incident occurs in order to meet deadlines.
- Incorporate all the information with picture, receipts and written form.
- Pay the premiums in time and establish automatic payment to avoid lapses.
- Never lie on your application whatever you do.
Your next step is simple. Take your existing insurance policy at night and go through the exclusions section. That single step would make you far ahead of 90% of policyholders. In case of loopholes, then call your agent tomorrow and request to fill them in. When a claim passes without any issues, you will be glad you did it.
This paper is informational in nature. It is not a legal or financial advice. All individual situations should be guided by an insurance professional or attorney who is licensed.
