When you take out insurance, you’re buying a promise: that if something goes wrong, your insurer will step in and help. Most of the time, that promise is kept. But sometimes, insurance companies delay, underpay or flat-out deny valid claims. When this crosses the line from a simple mistake to unreasonable or deceptive practices, this is known as ‘insurance bad faith’.
Simply put, bad faith is when an insurer doesn’t co-operate honestly or fairly with its policyholders. Every insurance contract includes an implied duty of ‘good faith and fair dealing’. When a company violates that duty, there are often legal options worth exploring.
Below, we’ll break down what insurance bad faith can look like, why it happens and what you can do about it.
Examples of insurance bad faith
Bad faith can come in a few different forms:
Unreasonable delays
This is when an insurer drags its feet for months, asking for the same documents over and over again, or going silent without updating you on your claim.
Denying a claim without a good reason
You receive a denial letter with little to no explanation, or with a reason that clearly doesn’t match the terms of your policy.
Misrepresenting the policy
This is when an adjuster claims something is ‘not covered’ when it is clearly written in the policy. They may try to twist the meaning of certain language or clauses to get out of paying.
Lowball offers
Sometimes an insurer will admit that a claim is valid, but will make an offer that is far below the actual value, hoping you’ll accept it out of desperation. It’s important to recognize the signs of insurance bad faith so that you’re not being taken advantage of.
Why does it happen?
Insurance companies are businesses, and like any business, they watch their bottom line.
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