What Are My Options When My Claim Is Underpaid?
Have you recently filed an insurance claim and suspect that the payout fell short of covering your damages? If so, you're not alone. Many individuals face the frustrating situation of receiving an underpaid insurance claim.
Underpaid claims can lead to financial stress and frustration. The funds you receive may be insufficient to restore your property and/or fully cover your medical expenses, leaving you to cover the difference out of pocket. This can disrupt your financial stability and cause inconvenience.
You’ve been through enough to be dealing with an underpaid claim at this point. You don’t deserve such treatment from your insurance company. You should be focusing on moving forward with your life–not banging your head against the wall in frustration.
At Arnett & Arnett, PC, we understand your struggles. Our insurance bad faith attorneys in Chandler, Arizona, help policyholders throughout the state recover the full amount of the coverage they are due.
What Is an Underpaid Insurance Claim?
When an insurance company pays less than the amount needed to cover the damages as stipulated in your policy, the insurer is “underpaying” your insurance claim. This unfortunate scenario can leave policyholders struggling to repair their property or cover medical expenses.
Example: Imagine your house is damaged by a severe storm. You file a home insurance claim expecting to receive enough funds to cover all necessary repairs. However, when the check arrives, it's considerably less than the repair estimates provided by contractors.
Why Do Insurance Companies Underpay Claims?
Insurance companies are businesses aiming to maximize profits. One way they do this is by minimizing payouts. By underpaying claims, they reduce their expenditures and increase profitability. Unfortunately, this practice can come at the expense of policyholders and often goes against the insurer’s duty of good faith and fair dealing.
Insurers also often apply depreciation to the value of your damaged property, which can reduce the claim amount. While it’s true that your property and its contents may lose value over time due to factors such as wear and tear, you need to understand wear and tear exclusions in property insurance claims to ensure that the insurer's assessment is objective.
Insurance policies often contain complex and ambiguous language. This can lead to misunderstandings about coverage and claim amounts. Insurers might exploit these ambiguities to justify lower payouts, leaving policyholders at a disadvantage.
How Do You Know If Your Insurance Claim Is Underpaid?
Here are some signs of an underpaid claim to watch for:
Discrepancies in estimates: If the funds provided by your insurance company fall short of the quotes you've received from contractors or repair shops, your claim may have been underpaid.
Lack of transparency: Insurance companies should explain their payout decisions clearly. If you receive a vague or incomplete explanation for the amount awarded, it's reasonable to question the fairness of the settlement.
Insufficient coverage for additional costs: Underpaid claims often fail to account for additional expenses related to the damage. For instance, policyholders may need to cover temporary housing costs or rental cars while their property or vehicle is being repaired. These costs may indicate an underpaid claim if they are not adequately covered.
When in doubt, you might want to consider speaking with an attorney who can determine whether your claim was underpaid and if you deserve more than the insurer wants you to accept.
Your Options if Your Insurance Claim Is Underpaid
Dealing with an underpaid insurance claim can be challenging, but don't let it disrupt your life. Take control of the situation and explore your options to secure the best possible outcome.
1. Paying Out of Pocket
One option–although not always the most desirable one–is to pay for the remaining costs out of pocket. Before considering this route, evaluate your financial situation. Can you afford to cover the difference without jeopardizing other financial obligations?
The potential benefits of paying out of pocket include:
Immediate resolution: It can expedite repairs or replacements, allowing you to move forward with your life quickly.
Avoiding hassles: It eliminates the need for prolonged disputes with your insurance company.
That’s pretty much it with the advantages. The potential disadvantages include:
Financial burden: The most obvious downside is the financial strain it can place on you, especially if the underpaid amount is thousands of dollars.
Potential future disputes: Paying out of pocket might not resolve the underlying issues with your insurance, potentially leading to future disputes.
Paying out of pocket when your claim has been underpaid may seem like the only option left, but it’s not.
2. Appealing Through Your Insurance Plan
Most insurance policies have an appeals process for disputed claims. This process allows you to challenge the insurer's decision and request a reassessment of your claim.
To strengthen your appeal, you will need to gather all relevant documentation, including initial claim submission (the original claim form and any supporting documents you submitted), damage estimates, and correspondence with the insurer).
When filing an appeal, your goal is to address all discrepancies or inaccuracies in the insurer's assessment. Regularly follow up with your insurance company to ensure your appeal is being reviewed and processed.
3. Filing a Bad Faith Insurance Lawsuit
Bad faith occurs when an insurance company acts dishonestly or fails to live up to its contractual obligations. Examples of insurance bad faith tactics include unjustified claim denials, excessive delays, and underpayment of claims without valid reasons.
If you believe your insurance company acted in bad faith when underpaying your claim, consider consulting with an attorney who knows how to hold insurers responsible. An experienced attorney can help you assess the strengths of your case, gather evidence, and represent you in legal proceedings.
If your bad faith lawsuit is successful, you may be entitled to various remedies, including:
Compensatory damages: reimbursement for the underpaid claim amount and any additional financial losses incurred.
Punitive damages: in cases of egregious bad faith, the court may award punitive damages to punish the insurer and deter similar behavior.
Legal fees: The court may order the insurer to cover your legal expenses associated with pursuing legal action against the company.
Everyone’s situation is unique, so you might want to contact an attorney to help you find the right path forward to get the financial relief you deserve.
Fight for the Full Value of Your Claim
In a perfect world, insurance companies should act in good faith and honor their obligations in policies. The problem is that we don’t live in a perfect world, which is why insurers may underpay claims for the sake of their bottom line.
An underpaid insurance claim can lead to delays in getting your life back to normal, causing stress and financial strain. Fortunately, you may have options to fight for the full value of your claim, and our attorneys at Arnett & Arnett, PC, might be able to help.
Reach out to Arnett & Arnett, PC to discuss your options and your best path forward during a free consultation. We serve clients throughout Arizona, including Gilbert, Chandler, Phoenix, Tucson, and Flagstaff.