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You have insurance for a reason: if something happens to you, your home, or your car, your policy will kick in to provide you with financial coverage so you or your family are not stuck paying a huge bill. But what happens if your claim is denied? 

Let’s go over why your insurance claim may be denied and what you can do. 

Reasons Your Insurance Claim Got Denied

There are many reasons why your claim may have been denied, including the following:

Damages Were Over Your Coverage Amount 

When you first take out an insurance policy, you can choose various factors for your plan, including the coverage amount. Generally speaking, the higher the coverage amount applied for, the more expensive the insurance policy will be. 

It’s important to carefully assess your needs before selecting a coverage amount so that when the time comes to file a claim, you’ll receive enough money to cover the cost of damages. 

But if the claim you file involves damages far above your coverage limit, you will have to cover the difference on your own. For instance, if your coverage amount is $50,000 and your claim specifies $80,000 in damages, you’ll need to pitch in that extra $30,000 yourself. 

You Lied On Your Application

When it comes time to file a claim, honesty is imperative. Omitting certain pieces of important information to try and get your claim approved (or to claim a higher amount of damages), is not worth the risk. Complete transparency is crucial, as your claim can be denied if your insurer discovers that you’ve been dishonest.

Honesty needs to start from the moment that you apply for a policy. When you first apply for an insurance plan, you’ll be asked a series of questions. The answers you provide will help your insurer determine your eligibility for coverage and the cost of your policy. If you don’t provide accurate information right from the get-go, any claims made going forward may be denied, and your policy may be at risk of being cancelled. 

For instance, when applying for a life insurance policy, if you smoke and do not specify that on your application, you could be denied. When it comes to insurance, honesty is the best policy.

Your Claim Was Made During The Contestable Period 

A life insurance policy includes something known as a ‘contestable period’, which gives the insurance provider a chance to make sure your claim is not fraudulent before the benefit is paid out. This period is usually anywhere from 1 to 2 years after a policy is taken out. 

Your insurance company will want to have some time to carefully review your claim and application to make sure it is accurate and that there is no false or missing information. 

If you die during the contestable period, there is a risk that your benefit payment to your beneficiaries may be denied. That said, the insurer is still required to honour the contract, though they still reserve the right to void the claim if they find any false claims on the application. 

Your Cause Of Death Is Not Covered

If your beneficiaries submit a claim on your life insurance following your death, there’s a possibility that they may not receive the benefit if your cause of death is not covered under your policy. 

Insurance companies usually have a list of death causes that are excluded from policies, such as suicide, pre-existing medical conditions, travelling to a dangerous destination, or being intoxicated while driving, to name a few. Look over your policy to see what types of death are and aren’t covered. 

You Missed The Time Frame 

If you must file a claim, you should do so immediately or shortly after the incident in question. Waiting too long can risk claim denial. 

You Missed Payments

Your policy will only remain active if you keep up with your premium payments. If you fail to pay your premiums, your policy can be cancelled and you will no longer be covered. 

Your Policy Doesn’t Cover The Incident

Certain incidents are not covered under various insurance policies. For instance, an auto insurance policy may not cover damage done to your car if it is being used for illegal purposes. 

Similarly, your home insurance policy may not cover a claim if the damage was caused by a flood from an external source — such as sewer backup or a torrential downpour. Separate riders may need to be purchased for these types of issues.

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What Should You Do If Your Insurance Claim Is Denied?

If your claim is denied, you may still have some recourse. Consider taking the following steps:

Get In Touch With A Higher Up At The Insurance Company

When you file a claim, you’ll be assigned an adjuster to deal with your case. If you don’t get the outcome you were looking for, you may be able to speak to someone with more to see if anything else can be done for your situation.

Contact The Regulators Or Ombudsman

You have the option to file a complaint in writing to the internal ombudsman of your insurance company. This ombudsman will investigate your complaint. If you have an issue with the insurance agent, you can contact an insurance regulator in your province. They will look further into the conduct and qualifications of the agent or broker

Get A Third-Party Review

There are services available that will take an unbiased look at your case and may help to reverse the decision about your claim being denied. 

How To Make An Insurance Claim

To file a claim, consider the following:

Review Your Policy

Before you file a claim, make sure you are covered for the incident in question. Most policies have exclusions, so you’ll want to make sure your situation is not excluded before the claims process. 

Consider If Filing A Claim Is Worth It

In some cases, it may cost you more to pay for your deductible — which is required before your policy kicks in — than it would to cover the cost of damages suffered. For example, if your car insurance deductible is $1,000 and the cost to make repairs is $700, it wouldn’t be worth it to file a claim. 

Furthermore, will your policy premium increase if you file a claim? The likely answer is yes. If your claim is small, it’s probably not worth the increase in your monthly payment. 

Call Your Insurance Company Right Away

As mentioned, you should file a claim soon after the incident to avoid the risk of being denied. When you contact your agency, be sure to provide them with as much information as possible. This includes a description of the damage, photos, receipts, police reports, medical records, and any other info that your insurer will need to assess your claim.

Final Thoughts On Your Insurance Claim Being Denied

The last thing you want is to have an insurance claim denied, especially after being diligent about making your payments. But there are certain things that you may be doing that could put you at risk of having your claim denied. Not only should you keep up with payments, but also make sure that you’re honest in your application. Similarly, be sure to file your claim on time, and that the incident in question is included in the policy.

Insurance Claim FAQs

What does it mean when your insurance policy lapses? 

When an insurance policy has “lapsed,” that means it’s been cancelled due to failure to make payments. When this happens, you will not be covered.

How long does it take to get my insurance claim payout?

Every insurance claim is different, as is the type of insurance policy. Payouts for car or home insurance claims are usually made about a week or so after all paperwork and documentation are reviewed and the claim is approved. Life insurance benefits payouts may take a bit longer, up to a month or two.

Can my insurance deny my claim if I drive with a suspended license?

Yes, car insurance policies will only provide coverage when you are operating your vehicle lawfully. If you are driving with a suspended license, not only can your claim be denied, but you may be denied coverage altogether.
Priyanka Correia, BComm avatar on Loans Canada
Priyanka Correia, BComm

Priyanka Correia is a Marketing Coordinator and personal finance expert at Loans Canada. Priyanka completed her Bachelor's degree in Marketing at Concordia University and has published work that has been mentioned in various news media. She is passionate about money management and educating Canadian consumers about how to take control of their financial lives.

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