3 Insurance Nightmares - and How to Avoid Them

Having insurance is supposed to mean having peace of mind in case of an unexpected event, emergency or problem. You pay your premiums faithfully for a long time and expect that when the time comes, your insurance company will be there for you to help with any issues. Sometimes, however, people who rely on their insurance to help them out of certain situations end up suffering through serious issues or nightmare scenarios that they wouldn’t wish on their worst enemy. Here are a few of them and how to avoid getting into them yourself.

Claim Denied!

Whether it be life insurance, medical insurance or even auto insurance, when the time comes to file a claim, you can expect a thorough and detailed investigation by the insurance company. More times than people would like they often find themselves hearing those five dreaded words: “Your claim has been denied.” While the reasons for having a claim denied are varied, there are some more common ones that you can work to avoid:

1. Be Totally Honest on Your Application

Lying, even a little bit can be sufficient reason for your insurance company to deny you in the event you ever have to process a claim.

2. Keep Your Payments Current

If you are behind in your payments it is very easily to accidentlly be cancelled for your insurance and you may not necessarily find out about it until it is too late

3. Cooperate Fully With the Investigation

When the time comes to file a claim, if an investigation is launched, you should cooperate fully (and politely) with the investigators. Any attempts at stalling, delaying or refusing to give requested information can lead to your claim being denied.

Reduced Payment

In auto-insurance this can happen by getting into an accident in a car you paid $20,000 for a few years ago. You are fully insured but when the time comes to pay off your totaled car, you might get a check for maybe $10,000 when you still owe $15,000 on the car. How did that happen? Check your policy carefully; most auto insurance policies only cover the current value of your car, not what you owe on it. In order to avoid this nightmare, look into buying “gap insurance” which will pay the difference if you ever find yourself in that situation.

In homeowner’s or renter’s insurance, this can happen if you find yourself unable to justify the full amount of your insurance. Just because you are insured for $50,000 in personal effects does not necessarily mean that you will be cut a check for that amount after a claim. An insurance adjuster will likely want a list of all the items you have lost, their approximate value and a purchase date. They will then depreciate the items on the list by a ‘fair’ amount and give you a check for the number that they come up with. Also, as a homeowner, be sure to check and make sure your policy covers the accidents of others who may be on your property.

Medical Insurance Runs Out

People who suddenly find themselves hospitalized long term, naturally rely on their health insurance plan to see them through the situation - it’s not as if they don’t have enough to worry about with whatever has hospitalized them in the first place. Many people, however many people are unpleasantly surprised by how quickly their hospitalization can run through the limits of their insurance coverage. Before they know it, they are receiving a notice to their bed that they have reached the limits of their coverage and their expenses will no longer be paid for.

The best way to avoid this potential trap is to look into purchasing supplemental long-term care or hospitalization insurance which is offered by many providers out there. These insurance policies are usually very inexpensive and can offer a good deal more protection in the case of hospitalization or even long-term home care.