Why Do Insurance Companies Deny Claims?

Filing an insurance claim should be straightforward—especially when you’ve been paying premiums for years. But many property owners are shocked when their insurance company denies their claim. 

Whether it’s a homeowners, renters, or commercial property insurance claim, denials can be frustrating and costly.

Let’s break down the most common reasons behind denied property insurance claims and how you can protect yourself.

1. Lack of Coverage for the Claimed Damage

One of the most common reasons for claim denials is that the damage isn’t covered under the policy. Many policyholders assume they are protected against all types of property damage, but insurance policies often have strict exclusions.

For example, standard homeowners insurance typically does not cover flood or earthquake damage—these require separate policies. Similarly, wear and tear, gradual damage (such as mold from long-term leaks), and some types of structural issues might be excluded.

How to Avoid This: Review your insurance policy thoroughly and speak with your agent to understand exactly what is and isn’t covered. 

Learn More: Can You Be Denied Homeowners Insurance?

2. Insufficient or Incorrect Documentation

Insurance companies rely on detailed documentation to process claims. If your claim lacks proper proof—such as photos, receipts, or repair estimates—it may be denied.

Some insurers might also argue that the damage was pre-existing or not as severe as claimed, especially if there are no recent records of the property’s condition.

How to Avoid This: Take before-and-after photos of your property, keep records of maintenance and repairs, and ensure all claim forms are filled out completely and accurately.

3. Late Filing of the Claim

Most insurance policies have strict deadlines for filing claims, which can range from a few weeks to several months, depending on the insurer and type of damage. If you wait too long, your claim may be automatically denied.

Delays in reporting damage can also make it harder to prove that the damage occurred during the policy period and wasn’t worsened by neglect.

How to Avoid This: File your claim as soon as possible after the damage occurs. If immediate filing isn’t possible, notify your insurance company of the incident and ask about the deadline.

4. Failure to Mitigate Further Damage

After an incident like a fire, storm, or water damage, policyholders are expected to take reasonable steps to prevent further damage. If your insurer determines that you failed to protect your property, they might deny or reduce your claim.

For example, if a pipe bursts and you don’t shut off the water or call for emergency repairs, resulting in more damage, the insurance company may argue that part of the loss was preventable.

How to Avoid This: Take immediate action to prevent further damage—such as boarding up broken windows, covering leaks with tarps, or calling emergency repair services. 

5. Discrepancies or Misrepresentation

If there are inconsistencies between your claim and what the insurance adjuster finds, your claim could be denied. Even small misstatements—such as exaggerating damage or failing to disclose prior issues—can raise red flags for insurers.

In extreme cases, insurers may accuse policyholders of fraud, leading to claim denial and even legal consequences.

How to Avoid This: Be completely honest in your claim. Provide accurate information and let the adjuster conduct a fair assessment of the damage.

6. Pre-Existing or Maintenance-Related Damage

Insurance is meant to cover sudden and accidental damage, not gradual deterioration or lack of maintenance. Claims for damages caused by long-term issues—like a roof that’s been leaking for years or foundation cracks from settling—are often denied.

How to Avoid This: Perform regular maintenance on your property, keep records of repairs, and address small issues before they become major problems.

Learn More: 10 Reasons Insurance Companies Deny Fire Claims (And How to Avoid Them)

7. Excluded Perils (Acts of Nature or Specific Disasters)

Many property insurance policies exclude damage from certain natural disasters or specific causes.

For example, a standard homeowners policy won’t cover flood damage, and many policies exclude coverage for earthquakes, mudslides, and sinkholes unless a separate rider is purchased. 

How to Avoid This: Understand your policy’s exclusions and consider supplemental coverage for specific risks, especially if you live in areas prone to natural disasters.

8. Disputes Over Claim Value

Even if your claim is approved, you and your insurer may disagree on the repair costs. Insurance companies often rely on their own adjusters, who may estimate a lower repair cost than what contractors quote.

If an insurer undervalues your claim, they may offer a payout that’s far lower than what you need to cover repairs, making it seem as though your claim was denied.

How to Avoid This: Get independent repair estimates from licensed contractors and, if necessary, consult a public adjuster or insurance attorney to negotiate a fair settlement.

9. Policy Lapses or Non-Payment

If your insurance policy has lapsed due to missed payments, your insurer won’t cover any damage that occurs after the policy expiration. Some policyholders don’t realize their coverage has expired until they file a claim and receive a denial.

How to Avoid This: Set up auto-pay for your premiums or mark payment due dates on your calendar to avoid any accidental lapses in coverage.

10. Adjuster’s Discretion & Bad Faith Denials

Sometimes, an insurance company may deny a claim unfairly—whether due to an adjuster’s personal judgment, internal policies that prioritize profits, or even bad faith practices.

Signs of bad faith claim denial include:

• Unjustified delays in processing your claim
• Misinterpretation of policy terms
• Requests for excessive, unnecessary documentation
• Denying claims without proper investigation

How to Avoid This: If you suspect bad faith, gather all correspondence, request a written explanation for the denial, and consider consulting a public adjuster or legal expert to challenge the decision.

Avner Gat, Inc.’s Stance on Denied Claims

Avner Gat, Inc. does not handle denied claims. Instead, we specialize in helping property owners navigate the insurance claims process before a claim reaches denial, ensuring policyholders get the best possible outcome from the start.

Call us at (818) 917-5256 for a free consultation.