Reasons Why Your Car Insurance Claim Might Be Denied

There are multiple reasons why your car insurance claim might be denied. One of the biggest reasons why an insurance claim is denied is that the insured has not kept up with their policy and it has lapsed or expired. Auto insurance companies will also deny your claim and investigate the incident thoroughly if they have any reason to believe that you are trying to defraud the company.

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Rachel Bodine graduated from college with a BA in English. She has since worked as a Feature Writer in the insurance industry and gained a deep knowledge of state and countrywide insurance laws and rates. Her research and writing focus on helping readers understand their insurance coverage and how to find savings. Her expert advice on insurance has been featured on sites like PhotoEnforced, All...

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Leslie Kasperowicz holds a BA in Social Sciences from the University of Winnipeg. She spent several years as a Farmers Insurance CSR, gaining a solid understanding of insurance products including home, life, auto, and commercial and working directly with insurance customers to understand their needs. She has since used that knowledge in her more than ten years as a writer, largely in the insurance...

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Reviewed by Leslie Kasperowicz
Farmers CSR for 4 Years

UPDATED: Nov 12, 2020

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Getting into a car accident is a horrible enough experience as it is. Dealing with insurance issues after the accident, however, can add even more stress to an already stressful situation. If you end up having your insurance claim denied, you could end up in an even tighter spot.

Although having your claim denied is quite rare, it is not impossible for this to happen. Insurance companies are businesses trying to remain profitable, so if they have a valid reason to deny your claim, they will. Continue reading below to learn about why your claim could be denied and what you can do to ensure a claim denial doesn’t happen to you.

Insurance Policy Lapses

One of the biggest reasons why an insurance claim is denied is that the insured has not kept up with their policy and it has lapsed or expired. If you are not currently paying your monthly premiums, then your insurance company is not going to extend your protection to help you out. This could force you to pay for damages yourself, out of pocket, which could end up being thousands of dollars, or more.

Insurance policies often have to be renewed manually every year or every six months. If you forget to do this, you could be on the hook for lots of money if you are in a collision with lapsed or expired insurance. It may seem like a simple thing to remember, but the statistics show that many people forget to do this on time every year, and it causes people a lot of problems.

To prevent lapses in coverage, you could set up an automatic payment schedule that renews each year automatically. You could also talk to your insurance provider about coming up with a solution that keeps a lapse in coverage from occurring. It is beneficial to your insurer for your premium payments to keep being posted, so they will most likely work with you to set something up.

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Insurance Fraud

It may seem like a no brainer, but auto insurance companies will deny your claim and investigate the incident thoroughly if they have any reason to believe that you are trying to defraud the company.

A common type of fraud involves the insured is trying to get money for a fake injury. Sometimes, in this situation, the insured will go after lost wages due to hospitalization or emotional distress, though they are simply trying to get money from the insurance company to pay for them to stay home and not have to go to work.

Another way that some try people to defraud an insurance company is through property damage claims. Some people have tried to pretend that their car has been stolen so that they can get insurance money to cover the cost, even though they still have the vehicle, they are just hiding it somewhere. This is a drastic measure, but these things do happen, and it is why some claims are denied.

Avoiding having your claim denied for fraudulent reasons is easy – just don’t try to defraud your insurance company. Read our list of common types of auto insurance fraud so that you are familiar with what is considered to be fraud, just in case you don’t accidentally commit fraud without realizing it.

There may be times when your insurer denies your claim or puts it on hold, pending investigation, even when your claim is legitimate and not fraudulent. Because auto insurance fraud is prevalent, the details surrounding your claim may have triggered a red flag in your insurer’s system that requires the adjuster to investigate your claim further before approving it. In situations such as this, it is best to “wait it out” and provide your insurer with whatever additional information they need to expedite the claims process and get it approved.

Not Enough Coverage

Another reason that your insurance claim may be denied is due to the amount of coverage you have not being enough to cover the costs of injury or property damage done by the accident. For example, if you have your state’s minimum bodily injury coverage amount of $10,000 but the total damages come out to $20,000, your claim may be denied because your insurance policy doesn’t cover that amount.

In this scenario, the total amount will not be denied, but anything that is over the $10,000 will be. So, you will be on the hook for the other $10,000 worth of damage. That is a lot of money to have to pay out of pocket, so it is important to have a policy that keeps these situations from happening. Having sufficient bodily injury and property damage coverage limits, while they may warrant higher premiums, can end up saving you money in the long run.

Your state’s minimum liability requirements may be outdated, and the minimum coverage amount may be lower than you may need. With the ever-increasing costs of medical care and legal fees, the amount you’ll be liable for in an at-fault accident is always going up. So, if you can afford it, it is in your best interest to opt for higher coverage amounts than your state requires.

Individual Is Not Covered

Your auto insurance claim could end up being denied if the person that was driving the car at the time of the collision was not listed as an insured driver on your policy. This could happen if kids are driving their parent’s car, or if a friend is borrowing the vehicle for a day. Usually, car insurance follows the car and not the driver, but in some situations, like if the driver lives in your house, they will need to be added to your policy in order to drive your car. If they aren’t listed on the insurance policy as a driver, and they should be, then anything that happens while they’re driving will be on your dime.

If you know that you are going to have someone else drive your car, then you can double-check with your insurance company to make sure that you are covered in case of an accident. If not, then there are ways to add an additional driver for a short period of time for an extra cost. This can extend your coverage to that person when driving to help avoid your insurance claim being denied due to the individual not being covered.

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License Suspension or Revocation

Another reason that could cause your insurance claim to be denied is a driver’s license issue. If your license has been suspended or revoked, then even with adequate insurance coverage for an accident, your claim could be denied because of an invalid license. Most insurance companies require that you have a legal license, which means that to remain covered, it must not be expired or suspended.

If you are driving with an expired, suspended, or a revoked license, then it is legally equivalent to driving without a license. Making sure that your license is renewed on time is one way to ensure that you will not have this issue. If your license is suspended or revoked, there are likely other issues involved, and these can likely be avoided in the future by making sure that you follow all rules of the road.

Final Word on Claim Denials

The situations listed above are not all of the reasons that an insurance company can deny your claim, but they are some of the most common. Remember to make sure that you keep your insurance policy active, that you have enough coverage, that all drivers are covered, and that you maintain a valid driver’s license. Staying on top of these things won’t guarantee your claim won’t be denied, but it’ll give your claim a high likelihood of being approved.

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