Shuman Roy is an entrepreneur, business owner, and musician. He started RoysNoys, LLC in 2013 as a music production and education service company. He also offers small business consulting and advisory services to help businesses get from start-up mode to turn-key operations. Shuman earned his M.B.A from the Stern School of Business in 2001 and has an undergraduate degree from Manhattan College in ...

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Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He has an MBA from the University of South Florida. Joel...

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Reviewed by Joel Ohman
Founder, CFP®

UPDATED: Jul 19, 2021

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Insurance Q&A: “Why do insurance companies deny claims?”

This is potentially the most frustrating situation on planet Earth. You paid your insurance premium on time every year but your claim got denied. But why?

The obvious answer is you didn’t purchase the right coverage. An insurance policy is a legally binding contract between you and the insurer.

Therefore, if you purchased the correct coverage your insurance claim wouldn’t be denied – by law.

It’s Your Fault – 99% of the Time

Assuming you are absolutely “in the right,” and your claim should be covered, you would be able to arbitrate with the insurer or sue them and go to court to recover your damages.

Remember, the contract (policy) spells out the details of your coverage…line by excruciating line.

We at TTAI were afraid to write and post this article, as the answer is not one anybody wants to hear, which may bring us some heat.

There, we said it. It’s likely your fault, and here’s why:

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You’re Cheap (or budgeted improperly)

Did you buy based on the lowest premium you could find? Do you demand to be insured by a national “chain” insurance company (because you believe their TV commercials), and limit coverage because they were gouging you?

What costs you more each year; your iPhone (and monthly service), cable bill, or your car insurance? Which, with regard to your claim, have you now determined is more important?

While every survey completed in the U.S. shows time and again that we “are willing to pay more for insurance to get the best coverage,” the reality is more in line with us purchasing on rate.

Have you ever heard the phrase “actions speak louder than words?” The “action” leans more towards purchasing on price.

You Didn’t Read the Policy

It would be nearly impossible for an insurance agent to read an entire policy to you at the time of purchase – and you certainly wouldn’t sit through it.

However, it’s still your responsibility to read your policy from front to back when you receive it.

Kind of like an adjustable rate mortgage in 2005; if there is something you don’t understand you need to ask the agent or the insurance company for an explanation.

We know it’s a pain in your butt. We know you probably didn’t read your policy. The courts don’t really care though. It’s a contract, and if you signed it, you are responsible for understanding it.

You Thought You Purchased a Warranty

This is more of a property insurance mistake, but an auto insurance example makes it clear. Car insurance companies don’t pay to repair your worn out tires, your oil changes or the wiper blades on your car.

We all understand that. Why not? Those are maintenance responsibilities of owning a car.

We tend to forget the “maintenance” piece when it comes to property insurance (homeowners). Your foundation, roof and anything else that is subject to wear and tear (like car tires) is your responsibility to keep up.

Replacing a 20 year-old, leaking roof is your responsibility. Insurance companies are not (likely) going to pay for that claim, as it’s not “damage” to your home from a specific event, rather wear and tear over time.

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You Didn’t Care…Until Claim Time

This is not really a specific reason, rather a compilation of the reasons outlined above.

The writer of this article is an insurance agent speaking from experience and has “seen it all.” The “denied” claim is almost always attributable to one of the reasons above.

It’s a tough sell to blame the agent, who would make MORE money by selling you MORE coverage. It’s counterintuitive to think they don’t want you covered to the hilt.

Insurance is not the joke television commercials make it out to be to pique your interest in purchasing from their company.

Take it seriously. Ask questions. Review your ENTIRE policy. Ask more questions. Balance your budget as though having a denied claim could financially ruin you.

Then buy the best coverage you can afford – not after purchasing what you want and using what’s left.

Read more: Why do insurance companies deny coverage?