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When you're faced with damage to your home and property from a fire, tornado or other disaster, learning that your homeowners insurance claim has been denied can be devastating. Homeowners insurance claims can be denied for many reasons, including unpaid premiums and incomplete documentation. Here are some common reasons your claim may be denied and what you can do if this happens to you.
Why Are Homeowners Insurance Claims Denied?
Common reasons homeowners insurance claims are denied include:
No Policy in Force
If you don't pay your premiums, your home insurance policy could lapse. Consider setting up autopayments to avoid this risk. If you've just bought the policy and haven't yet made a payment, it won't be in force.
Not a Covered Peril
Homeowners insurance typically includes liability coverage for injuries on your property as well as damage or loss of your home's structure and your possessions from fire, smoke, wind, hail, lightning, theft, vandalism and some water damage. It also covers additional living expenses (ALE) if you must move out while repairs are being made.
Homeowners insurance usually doesn't cover damage from floods; earthquakes; sinkholes; landslides; sewer, septic tank or drain backups; or failed sump pumps. It also may not cover mold, plumbing or water damage. To protect your home, consider buying additional flood insurance or earthquake insurance policies or adding riders to your existing policy.
Damage Is From Negligence or Normal Wear and Tear
Damage from normal wear and tear or lack of maintenance isn't covered by homeowners insurance. Neither is damage from pests, war, pollution and nuclear accidents.
Missed Filing Deadline
There's usually a time limit for filing a homeowners insurance claim, so don't delay. Check your policy or contact your insurer for details.
Suspected Fraud
When you file a home insurance claim, an insurance adjuster typically visits your home to inspect the damage and calculate any insurance payout. If the adjuster finds something questionable, your claim may be denied.
Insufficient Documentation
The more evidence you provide to support your claim, the better. A home inventory list including photos, receipts and the estimated value of your belongings can help quantify your loss. You might also be asked for photos of damage or receipts for emergency repairs.
You Made Unapproved Repairs
You need to make urgent repairs, such as boarding up broken windows, to prevent additional damage to your home. However, you should delay making major repairs or moving out of your home until the insurance company approves these actions, or your claim could be denied.
What Are Your Options When a Homeowners Insurance Claim Is Denied?
When your home insurance claim is denied, the insurance company should provide a written explanation. If you review the explanation and still believe your claim was unfairly denied, try these steps.
Contact the Insurance Company
Claims are often denied due to insufficient information. Ask your claims adjuster what's missing from your claim and how you can help. Additional photos, receipts or a home inventory may be all that's required to get your claim reevaluated.
Keep Detailed Records
Document all communications with the insurer, including letters, emails, texts and phone calls. Keep copies of every document and photo you submit. Note whether the insurance agent fails to keep appointments or return calls or emails; this could be helpful in court.
File an Appeal
You may have to file a formal appeal with the insurance company to review your claim. There's typically a time limit for this; check your policy or ask your insurance agent for the deadline and directions for filing an appeal.
Contact Your State Department of Insurance
State insurance departments regulate insurance companies according to state laws and can explain your rights when your claim is denied. If filing an appeal with the insurance company gets no results, file an official complaint with your state's department of insurance. Some states also provide for mediation between insurers and homeowners.
Hire a Public Adjuster
Public adjusters examine damage to your home just like insurance adjusters do, but they work for you. Public adjusters may charge a flat fee, hourly rate or percentage of your insurance payout. Find public adjusters through your state department of insurance, the National Association of Public Insurance Adjusters or the National Association of Independent Insurance Adjusters.
Hire an Attorney
Some states don't allow public adjusters to assist homeowners with insurance claims; in this case, you'll need an attorney. You might also want to sue if you believe the language in your insurance policy is deceptive. Check your policy and state laws to see if there's a deadline for filing a lawsuit.
How to Pay for Home Repairs if Your Insurance Claim Is Denied
The average homeowners insurance claim is $14,935, according to the Insurance Information Institute. If your insurance company won't pay, you have other options for financing home repairs.
- Seek help from FEMA. The Federal Emergency Management Agency (FEMA) may offer temporary housing, money for living expenses or home repairs if your home is damaged by a major natural disaster.
- Tap your emergency fund. Be sure to adjust your budget to replenish your savings as soon as possible.
- Get a personal loan. Available from banks, credit unions and online marketplaces, personal loans typically require no collateral and may have fixed or variable interest rates. You'll receive a lump sum and pay it back in monthly installments over a relatively short time.
- Use a home equity loan. For larger repairs of $10,000 and up, you could use a home equity loan to borrow a lump sum against the equity in your home. Interest rates are usually lower than for personal loans or credit cards; terms of up to 30 years help make monthly payments manageable. Because home equity loans use your home as collateral, however, failing to repay the loan could cause you to lose your home.
- Use a home equity line of credit (HELOC). A HELOC uses your home equity as collateral for a revolving line of credit you can borrow from, up to your credit limit, during the draw period. Make interest-only payments on the amount borrowed until the draw period ends; then you'll repay the principal, typically over 20 years. HELOCs often have variable interest rates, so payments may rise. Like home equity loans, they can put your home at risk if you can't make the payments.
- Consider a credit card. Credit cards can be sufficient for smaller home repairs. Just avoid maxing out your card, which could hurt your credit score. Pay off the balance as soon as possible, or interest can quickly snowball. An intro 0% annual percentage rate (APR) credit card could be an option: Pay off the balance before the promotional period ends, and accrue no interest.
The Bottom Line
Whether you're applying for credit to cover home repairs or shopping for new homeowners insurance, checking your credit score and credit report could save you money. Insurance companies in many states check your credit-based insurance score before issuing a policy, just as lenders check your regular credit score. Paying down debt and making payments on time can help improve your credit score for lower interest rates and better terms.