Why Would a Car Insurance Claim Be Denied?
-
- 13+ Years of Editorial and Content Strategy Experience
- B.A. in English, Creative Writing, Colorado State University
Brandon Farestad is the AI Content and Editorial Manager at Confie, the parent company of Freeway Insurance, where he leads editorial strategy, content operations, and publishing standards…
- 13 Years of Insurance Industry and Content Experience
- B.S. in Applied Technology and Performance Improvement, University of North Texas
Rose Carter is an insurance content strategist and marketing executive with 13 years of experience developing consumer-focused insurance education and digital…
A car insurance claim may be denied when the policy doesn’t cover the driver, the vehicle, or the type of damage involved. Common reasons include a lapsed policy, an excluded driver, missing coverage, a policy exclusion, late reporting, and application errors. State claim rules generally require insurance companies to put a denial in writing and point to the specific policy language behind it.
A denied claim may leave you footing the bill for repairs, a rental car, and medical expenses. The reason behind it determines what happens next. Some denials stem from a fixable problem, like a missing document, while others reflect a firm limit in your policy.
State law shapes the process too. Each state sets its own deadlines, notice rules, and complaint process. This means the same denial may play out differently in Texas than in Arizona.
What Are the Most Common Reasons for a Denied Car Insurance Claim?
Most denials come down to one question: Did the policy promise to pay for this loss? Insurance companies answer it using the policy terms, the facts of the accident, and the information you gave them when you applied. These are some of the most common reasons for denials.
Your Policy Wasn’t Active
If your policy lapsed or was canceled before the accident, the insurer has no active contract to pay your claim under. Missed payments are a frequent cause. In Maryland, for example, an insurer may cancel for nonpayment when a payment is just one day late. It must mail a 10-day notice first, but it doesn’t have to prove you received it.
The Driver Wasn’t Covered
An excluded driver is someone your policy names as having no coverage, often to keep the premium lower. If that person drives your car and has an accident, the insurer may deny the claim. Rules on excluded drivers vary by state, so check your declarations page and your state’s requirements.
You Didn’t Buy the Coverage That Applies
Each part of a car insurance policy covers specific losses. For instance, a policy with only liability coverage pays for damage you cause to others but won’t repair your own car. Your declarations page lists the coverages you carry, so check it before you file a claim.
A Policy Exclusion Applies
An exclusion is a part of the policy that lists situations or damage it won’t cover. Normal wear and tear is a common exclusion, so a policy generally won’t pay to replace worn brakes or tires. Many personal auto policies also exclude business use, including driving for a rideshare app.
The Claim Was Late or Incomplete
Your policy may require prompt notice of a loss and cooperation with the claims adjuster, who is the person assigned to investigate your claim. The National Association of Insurance Commissioners (NAIC) advises drivers to report claims as soon as possible and keep notes on every conversation. Under the NAIC’s model claim rules, late notice alone shouldn’t lead to a denial. Exceptions to this include a written notice deadline in the policy or an unreasonable delay.
Wait until the adjuster inspects the damage before getting permanent repairs, such as body work. If you fix the damage before the insurance company sees it, it may deny your claim. Your policy may still require temporary repairs, such as taping plastic over a broken window, to keep the damage from getting worse.
Your Application Had Errors
If the insurance company finds a material misrepresentation on your application after an accident, it may rescind your policy. A material misrepresentation is false or missing information that would have changed whether the insurer sold you the policy or what it charged. Rescinding the policy cancels it back to its start date, so the accident isn’t covered.
In a 2023 Michigan case, an insurer rescinded a policy and denied an injury claim over a conviction left off the application. The state Court of Appeals upheld the decision.
Which Coverage Pays for What Kind of Damage?
The coverage you carry determines which types of losses your policy may pay for. Filing a claim for damage your policy doesn’t include will result in a denial, even if the accident wasn’t your fault.
Coverage What It Pays For What It Doesn’t Pay For Liability Injuries and property damage you cause to others, up to your policy limits Repairs to your own vehicle Collision Damage to your car from hitting another vehicle or an object, minus your deductible Theft, weather damage, or hitting an animal Comprehensive Theft, vandalism, fire, falling objects, weather, and animal strikes, minus your deductible Collisions with vehicles or objects, wear and tear, or routine maintenance Uninsured/Underinsured Motorist (UM/UIM) Your injuries, and in some states your vehicle damage, when the at-fault driver has too little or no insurance, or in a hit-and-run Damage or injuries you cause to others Your deductible is the amount you pay toward a covered repair before your insurer pays the rest. Collision coverage and comprehensive coverage each carry a separate deductible. Together with liability, they make up what’s often called full coverage, which lenders may require on financed or leased cars.
Example: A driver with liability-only coverage swerves to miss a deer and hits a tree, causing $3,500 in damage to the car. The driver’s insurance company denies the claim because liability only covers damage caused to others. If the driver had collision coverage and a $500 deductible, the insurer would consider paying up to $3,000. If the car had struck the deer instead, comprehensive coverage would apply.
Can the Other Driver’s Insurance Company Deny Your Claim?
Yes. The other driver’s insurance company may deny a third-party claim if it decides its policyholder wasn’t at fault. It may also dispute the percentage of the fault each driver carries. A lapsed policy or an accident caused by an excluded driver could also be grounds for a denial.
You still have options. For instance, you can try filing under your own collision coverage. Your insurance company may then pursue the other company for repayment, a process called subrogation. If successful, you may get some or all of your deductible back.
State claim rules generally say the other driver’s insurance company shouldn’t push you toward your own policy just to avoid paying when fault and damages are reasonably clear. If the other driver had no valid insurance, your UM coverage may apply.
What Should You Do After a Claim Denial?
A denial isn’t always final. To challenge one, you’ll need to understand the insurer’s reasoning, fill any gaps in your claim, and keep track of your deadlines:
- Read the written denial: Under NAIC model rules, insurers must provide denials in writing. Compare the cited policy provision, condition, or exclusion with your declarations page to see if there are any mistakes.
- Fill in the gaps: If the insurance company misread the facts or had incomplete information, send proof, such as photos, a witness statement, the police report, or a repair estimate.
- Ask for a review in writing: Send your request by email or letter, keep a copy for your records, and note the dates of every conversation with your adjuster.
- Meet the deadlines: Your policy and denial letter may set deadlines to appeal or sue. Act before time runs out.
Appeal, Appraisal, Complaint, or Attorney: Which Option Fits?
The step you take next depends on the reason for the denial and how much money is at stake. A dispute over paperwork or facts may resolve through an internal review. In contrast, a dispute over repair costs may call for appraisal.
Option Best For Advantages Potential Drawbacks Internal review Missing documents or factual mistakes Free and often the fastest route The same company makes the final call Appraisal Disagreements over repair cost or vehicle value Independent appraisers help set the amount Only available if your policy has an appraisal clause; doesn’t settle coverage disputes State insurance department complaint Delays, unexplained denials, or suspected rule violations Free, and the insurer must respond Only helps if the insurer broke a rule Attorney Large claims, serious injuries, or suspected bad faith Legal advice and the option to sue Legal fees may reduce your recovery amount If you think the insurance company’s offer is too low, check your policy for an appraisal clause. This clause lets you and the insurer each choose an appraiser to settle what the damage is worth.
If talks with your insurance company stall, you can file a complaint with your state insurance department for free. Include your policy number, the denial letter, and your record of calls and emails with the insurance company. The department forwards your complaint to the company, which must respond. If regulators find the insurance company acted improperly, they can require it to fix the problem.
Denial complaints are common. Washington’s insurance commissioner reports that denials ranked among the top three auto claim complaints from 2018 through mid-2023.
How Can You Lower the Risk of a Denied Claim?
- Pay on time: Set up automatic payments so your policy is less likely to lapse.
- List every driver: Tell your insurance company about everyone in your household who drives your car.
- Disclose business use: Ask about rideshare or delivery coverage if applicable.
- Report quickly: Call your insurance company as soon as possible after an accident or theft.
- Wait for the inspection: Make only temporary repairs until the adjuster reviews the damage.
- Review your coverage yearly: Check your declarations page to confirm you have the coverage you’re counting on.
Frequently Asked Questions About Car Insurance Claim Denials
How Long Does an Insurance Company Have to Approve or Deny a Claim?
The timeframe varies by state. Under NAIC model rules, an insurance company should accept or deny a first-party claim within 21 days of receiving proof of loss. Proof of loss is your signed statement and supporting documents. If it needs more time, it must explain why and update you every 45 days.
Does the Insurance Company Have to Tell You About Your State Insurance Department?
In states that follow NAIC model rules, yes. If you object to a denial, the insurance company must tell you in writing that the state insurance department can review the denial.
Can Filing a Claim Affect Your Rates Even If It’s Denied?
It may. The NAIC notes that how often you file claims and the types you file can affect your premium and whether your insurance company renews your policy. Ask your insurance company how it records a denied claim.
Do You Have to Accept the Insurance Company’s Settlement Offer?
No. The NAIC says you don’t have to accept a payment you believe is unfair. You can also ask the adjuster to explain the decision in writing.
Car Insurance Claim Denials: Key Takeaways
- A car insurance claim may be denied when the policy doesn’t cover the driver, the vehicle, or the type of damage.
- Lapsed policies, excluded drivers, missing coverage, exclusions, late reporting, and application errors are common reasons for denial.
- Insurance companies in states that follow NAIC model rules must put denials in writing and cite policy language.
- After receiving a denial notice, correct any errors or supply missing information, ask for a review in writing, and act before the deadlines to appeal or sue.
Compare Car Insurance Quotes with Freeway
Many denied claims trace back to a coverage gap in the original policy. The experts at Freeway Insurance can help you compare policies from multiple insurance companies to find the coverage right for your needs. Working with an agent can help you spot gaps before you buy, such as missing collision coverage or an unlisted driver. Closing those gaps the day your policy starts lowers your risk of a denial if you ever file a claim.
To compare options, start a free quote online, call 800-777-5620, or find a Freeway office near you.
Sources
- NAIC Unfair Property/Casualty Claims Settlement Practices Model Regulation (Model 902)
- Maryland Insurance Administration: Consumer Advisory on Policy Cancellations
- NAIC: Sharing Economy
- NAIC: What You Should Know About Filing an Auto Claim
- NAIC: Get Smart About Your Insurance Coverage
- Wolverine Mutual Insurance Co. v. Van Dyken (Mich. Ct. App., 2023)
- Freeway Insurance: Auto Insurance Coverage Pages
- West Virginia Offices of the Insurance Commissioner: Mandatory Limits
- Florida Statutes § 627.727: Uninsured Motorist Coverage
