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A lowball insurance settlement could leave you with losses

On Behalf of | Oct 1, 2020 | First-Party Property Insurance Claims

If there is a mortgage or other major lien attached to your primary residence, you probably have a contractual obligation with the lender or lienholder to maintain insurance on your home. Even if you have it paid off, you likely still have a policy protecting your home.

An insurance policy helps you recover lost property value in the event of damage to your home due to inclement weather or other unusual circumstances. Getting a settlement offer from your insurance provider can feel like a relief if you have had to wait several weeks to hire contractors to perform the repairs on your property. Before you sign a settlement offer or cash that check, you need to evaluate the property damage and the settlement offer.

Insurance companies want to limit what they pay to policyholders

Handing out a six-figure claim after a major storm demolishes half of a house or pushes a building off of its foundation usually means taking a substantial loss for the insurance company. Although you may have paid a policy for years without making any large claim, the total value of the premiums you have paid in the past may only represent a fraction of the claim you eventually file.

Your insurance company is a business, which means that it prioritizes turning a profit on the services that it provides to you and other policyholders. Limiting what they pay out on claims is one way for the insurance company to increase its profit margin. Some companies will engage in questionable tactics to reduce what they pay on valid claims.

Some insurance companies delay payout unnecessarily or deny claims that are obviously valid. Other times, the insurance company might offer a settlement that is much less than the cost of the property because the settlement absolves them of future financial liability.

Low settlement offers are an example of bad faith insurance

Given that profit incentives make insurance companies reticent to pay out on large claims, there are many federal regulations controlling how insurance companies operate. When a company does not uphold its own policy and offers compensation not in line with the coverage that someone paid for, they engage in bad faith insurance practices.

If you have received an unreasonably low settlement offer that does not comply with the terms of your insurance policy or cover the cost of damage to your property, you may be able to take action against your insurance company for failing to provide the coverage that you have paid for throughout the life of your policy.

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