Some types of insurance are voluntary. Others are mandatory. Homeowners insurance falls into a gray area between those two categories. People who purchase real property using financing typically have an obligation to carry property insurance.
Even those who purchase homes with cash or who have paid off their mortgages tend to carry property insurance to protect themselves from liability. Most people never need to make a sizable claim against their homeowner policy, but there are exceptions to every rule.
Criminal activity, house fires and inclement weather can all cause major property damage. The only way to pay to repair that damage may be to file an insurance claim. People who have paid their premiums for years without claims often expect insurance companies to happily assist them. They may end up struggling because of bad faith insurance practices. What type of conduct is a warning of bad faith on the part of the insurance company?
1. Denying valid claims
The professionals working for insurance companies may sometimes outright deny seemingly valid claims.
Denied claims force policyholders to appeal and can drastically extend the amount of time it takes to complete an insurance claim. Misrepresenting what a policy covers or denying a claim without a valid explanation are both examples of bad faith insurance practices that can leave policyholders frustrated and frightened.
2. Delaying claims processing
Insurance companies sometimes need to investigate to determine the validity of a claim or how much it is worth. Refusing to investigate is one example of bad faith insurance practices. Dragging out the investigation process or waiting weeks in between each step of the claims process can also be examples of bad faith practices.
The goal is to frustrate people so that they fail to follow up as they should, making it more difficult for them to get the coverage that they deserve. Especially when the insurance company does not have a clear reason for delaying claims processing, slow turnaround times may be a warning sign of bad faith insurance practices.
3. Offering low settlements
Sometimes, insurance companies know they have to pay a claim, but they don’t want to pay the full amount that they should. They may offer a lump-sum settlement in the hopes of ending company liability.
Lowball settlements are a common tactic used to deny people full reimbursement for covered losses. Typically, once a policyholder accepts a settlement, the insurance company has no liability for future expenses even if the settlement is far too low.
In scenarios where policyholders can show that an insurance company acted in bad faith, they may have grounds to take legal action. Bad faith insurance lawsuits can result in appropriate claims payouts and penalties for the insurance company. Reviewing policy documents and insurance company communication can help people validate their suspicions of bad faith practices.
