What to do when your insurance company won’t pay
Occasionally, an insurance provider may refuse to pay out, or may insist on paying you just a partial amount of the money you think you are entitled to. This can happen due to a number of different reasons, and can often cause you severe financial hardship.
One of the main reasons that an insurer may refuse to pay out is if the policy was not in place at the time you made a claim for what happened, or if you did not tell the truth or omitted to disclose certain details that could affect your claim thus making the policy invalid. In addition, there may be an exclusion clause in the policy stating that you cannot claim for what happened, or that the item in question is not covered under the terms of the policy. Failure to keep up to date with your monthly installments, and failure to keep your insurer informed of a change to your circumstances can also lead to a claim being rejected, as can failure to keep to the conditions dictated in the policy, or if your insurance provider has reason to believe that you are trying to claim for more than you should.
You may also have a claim rejected if you do not have enough cover in place to cover the amount of your loss because you have under-estimated the total value of your claim; this is known as being underinsured. Also, some policies pay out on a new for old basis, but others do not. If your insurance policy does not operate on a new for old basis your insurer may offer to pay you far less to replace an item as you have already had some use from it.
Another reason an insurer may refuse to pay out, or not pay out in full, is if the item you are claiming for exceeds the amount that your insurer will pay for one, individual item. You may also encounter problems if you have a particularly high excess on your policy, as this may exceed the total amount of your claim.
If your insurer refuses to pay they must always give you a reason. You should go over the details of your policy thoroughly to ensure that their decision not to reimburse you is reasonable. If you do find evidence that your insurance provider is being unreasonable your first course of action is to try to negotiate with them. Start by writing to your insurance company, explaining your complaint in full, informing them of what action you would like them to take, and stipulating a time in which you expect this course of action to be completed. Make sure that you keep a copy of your letter and send any correspondence by recorded delivery so you have evidence that your letter has been received.
If these negotiations do not prove successful then you can then make an official complaint via the company’s internal complaints process, details of which can be found on your insurers’ website, or in your policy documents. If the results of the formal complaints procedure are not satisfactory then you can pursue the matter further. In the UK, if your insurance provider is a member of Lloyds you can contact the Policyholder and Market Assistance Department. If this does not prove fruitful you can make an official complaint via the Financial Ombudsman Service. Their services are free, and you can ask them to intervene if you have already pursued your complaint with your insurer directly. You need to contact them within six months of receiving a final response from your insurer, and this response has to mention that you have a six month time limit to contact the Financial Ombudsman. You must also get in touch with them within six years of the event that you are complaining about.
Their decision is legally binding, and your insurer must adhere to their decision. If this decision is not one that you agree with then your final option would be to take your insurance company to court. However, this can be very expensive so should only be pursued if you are confident that your claim will be successful.
If you are not insured and you incur a financial loss it may be possible to take the company or individual responsible for your loss to court in order to recover your expenses. Similarly, if you are required to pay an excess for a car accident for which you are not to blame you may need to claim this amount back from the driver’s insurance provider. If you encounter problems you then have the option of taking the driver or their insurance provider to court. However, if your own insurer has already dealt with the claim they should claim the excess back for you on your behalf.
Insurance offers you peace of mind that if the worst happens you will be financially compensated, so it can be devastating if your insurance provider turns down your claim. However, there are a number of different options available to you if you believe that your insurer is acting unfairly, and by following the official complaints process you may well get your insurer’s original decision not to pay out overturned.