What to Do if a Car Insurance Company Denies Your Claim

If your claim is denied, you’ll receive a letter informing you of the decision and why it was made.

There are several reasons an insurance company may deny your claim. In some cases, you may be able to appeal the decision, but depending on the reason for denial, you may not have much leeway. Here are some common reasons for denial:

1. The damages exceed your policy limit. All insurance policies have coverage limits. For example, if you have liability coverage of 100/300/100, your limits are $100,000 and $300,000 in bodily injury liability per person and per accident, respectively, plus $100,000 in property damage coverage. If you file a claim for $150,000 in property damage, your insurance will deny you $50,000 because it won’t pay out more than $100,000 for a single incident. You’ll then be on the hook for that amount.To maximize your chances of approval, make sure you know the specifics of your coverage. Refer to your policy before you make a claim.
2. Your damages are not covered. In addition to coverage limits, you should be aware of exactly what your auto insurance policy covers. For example, if you don’t have full coverage insurance, you won’t be able to get a claim approved for repairs to your car if it’s vandalized.
3. Your policy has lapsed. If you let your auto insurance policy lapse and fail to renew it, you won’t be able to make a claim for any reason. Keep in mind that if you’re uninsured and get into an accident, it’s too late to find coverage. You need to have an insurance policy in effect at the time of the incident to make a claim.Be sure to pay your premiums on time, and keep an eye out for any cancellation notices from your insurer so you can rectify the situation before your policy is canceled. If your policy has lapsed, it’s wise to reinstate your insurance — even if you end up paying a bit more — so that you’re in compliance with state law and ensure you’re financially protected against any future incidents.
4. The information provided was misleading or inaccurate. When you file a claim and deal with insurance, always be as accurate and truthful as possible. Deliberately changing or omitting details in an attempt to get a payout is not beneficial; an insurance adjuster investigates all claims and can deny them if details don’t line up or if there is insufficient evidence of the incident.
5. You delayed reporting the incident. Auto insurance policies generally stipulate a time frame for filing a claim following an incident. It’s best practice to seek medical attention if needed and to file a claim as soon as possible. If you wait too long, the insurance company will have more reason to believe it’s not a legitimate claim and is more likely to deny it.

What if the Other Party’s Insurance Denies the Claim?

If you live in an at-fault insurance state, the party responsible for an accident pays for damages. That means that if someone else causes an accident, you’ll need to file a third-party claim with their insurance company to have your bodily injury and property damage expenses covered. You also may choose to file a claim with your own insurance company — for example, if you have collision insurance and the other insurer’s limits aren’t enough to cover your losses. Your insurance company may then try to recover losses from the other insurer through subrogation.

Third-party claim denials work the same way as denials for first-party claims (those made with your own company). For example, if the other driver has let their policy lapse or doesn’t have enough coverage, your claim through their insurer will be denied. Additionally, if the insurer disputes who is at fault, it could reject the claim. In such cases, you can present evidence — such as photos, a police report, or witness statements — to support your claim.

You can appeal third-party claim denials the same way you can appeal first-party denials. If you have uninsured/underinsured motorist coverage on your policy, that can also help cover expenses when the other driver lacks sufficient insurance. If all else fails, you may need to consider legal action to recover your losses.

Before you decide to appeal a denied claim, make sure you understand the reason for the denial and determine whether you feel it’s reasonable. If you were denied due to a lapse in coverage and your policy had indeed been canceled a month prior, the denial is most likely valid and appealing it won’t get you very far.

However, if your claim was denied for a reason you don’t agree with, such as a lack of coverage that you believe you have or a dispute over who was at fault, you may decide to appeal the decision. Most insurers have a process to facilitate this, and you may also contact your state’s department of insurance for assistance. For example, California’s Automobile Claims Mediation Program can help you reach a fair agreement with your insurance company.¹ You should plan to provide more evidence and documentation to support your argument.

Although hiring an attorney is not required to appeal a denial, you may choose to consult one before proceeding to get a better idea of your chances of success and to give more weight to your appeal. However, an attorney can quickly become expensive, so move forward only if it makes financial sense to fight the denial.

In extreme cases, you also may decide to pursue a lawsuit against the insurance company if you feel they are acting in bad faith. There is no guarantee that you will win, but if the damages are substantial, it may be a route worth considering.

Having a claim denied is not the outcome anyone hopes for when dealing with insurance. However, it’s a real possibility, and it’s best to be prepared. Before you file a claim, make sure you understand the nuances of your policy, including your coverage limits and the types of damages that are covered. If you feel that your insurance company has wrongly denied your claim, you can take steps to appeal the decision and attempt to get the payout you think you’re owed.