Some States Need to Change Their Insurance Rules

You’ve seen the most recent commercials where there are actors discussing what happens when you have an accident and file a claim that’s ultimately denied by your insurance company. Not only do these commercials describe the fact that many insurance companies can raise your rates by astronomical numbers, but they also describe possibilities that can happen when an insurance company denies your claim. What they haven’t covered in these commercials is the more criminal part of what an insurance company can do in some cases and in many states, which allow insurance claims to be denied.

Some states have laws that protect the insurance provider much more than you as a consumer when a claim is filed. This means if your car is stolen, even if you have theft insurance you might not get the check you’re expecting but a denial letter in the mail. This doesn’t seem fair, especially if you are someone who paid all your monthly premiums on time, are a safe driver and then suddenly you have an incident that could be a stolen car. You’re supposed to have insurance to cover you when these things happen, but here’s what could happen to you in some states.

In an example where your car is stolen and you have a $1,000 deductible and the vehicle that was stolen is worth $21,000 you would expect to receive a check for $20,000 from your insurance company. This value is important because in these states you can only sue for the value of the claim if the insurance company denies your claim, not for anything above that amount. This means you would have to pay your legal fees, damage fees and any court costs on your own which might lead you to think twice about actually filing a suit against the insurance company.

Why would you not sue if your claim was denied? In this example let’s assume your fees amount to $10,000 and you do win your case, now all you have is $10,000 to go buy another vehicle. In this instance it could benefit you to sue because you do now have $10,000 to put down on a vehicle, but many times the cost of replacement of a vehicle that’s stolen or severely damaged can be much less than this and fees can amount to more than the actual claim is worth, putting you in a hole financially just to make the insurance company pay for your claim.

As crazy as it may seem to have an insurance company denies these types of claims, this is common practice and because most consumers won’t go through the trouble of hiring a lawyer, because they might fear the insurance company has their own high priced lawyers on retainer, many of these claims go unpaid each year. This may make you wonder why you even bother having insurance coverage in the first place. These states that have laws that limit the claim to the value of the claim need to change their laws so that consumers can be completely covered, including fees associated with the claim.