Why Insurance Claims Are Denied and What You Can Do Next

Quick answer

A denial is a decision, not always the final word. Start by confirming in writing what was decided and why, note every deadline, and read the letter against your policy. Then gather evidence, ask for reconsideration or an appeal, and consider a complaint to your state insurance department. Health plans have separate internal and external review rights.

• Find out whether you have a denial, a partial denial, a delay or a reservation of rights. The next steps differ.
• Put the earliest appeal or complaint deadline in your calendar the day you read the letter.
• Ask for your policy, endorsements and claim file, and answer the stated reason with evidence.
• Internal appeals, regulator complaints and contract time limits run side by side, so check all of them.

Denial, delay, partial payment: know which one you have

People often say a claim was "denied" when something else happened, and the distinction matters because the next steps differ.

A denial means the insurer has decided not to pay, in whole, on the basis that the loss is not covered, a condition was not met or some other reason it will state. A partial denial or partial payment means it will pay some amounts but not others, or it values the loss at less than you think is right. A delay means there has been no decision yet. A reservation of rights means the insurer is still investigating while telling you it may deny the claim later for reasons it describes. And a rescission or cancellation is a different and more serious step, where the insurer says the policy itself should not have been issued or should end.

Start by finding out which one applies. The written decision should tell you. If you have only heard by phone, ask for the decision in writing. A written letter is what you will need for any appeal, complaint or conversation with an attorney. Once you know the category, the rest of this guide helps you read the reasons, gather what you need and choose among the options available.

Common reasons claims are denied

Reasons vary by type of insurance, but most fall into a handful of groups. Knowing them helps you read the letter and decide whether the stated reason fits the facts.

• The loss is not covered. Policies cover some events and exclude others. A typical homeowners policy, for example, is written around specific causes of loss, and some kinds of damage, such as flooding or earth movement, often require separate coverage. Whether an exclusion applies to your facts can be a real point of dispute.
• The policy was not in force. The premium was unpaid, the policy had lapsed, or the loss occurred before coverage began or after it ended.
• A condition was not met. Policies impose duties after a loss, such as giving prompt notice, cooperating with the investigation, providing documents, or protecting the property from further damage.
• Not enough documentation. The insurer says it lacks proof of the loss, its cause or its cost. This is often fixable.
• Disagreement about cause or value. The insurer believes the damage was caused by wear and tear rather than a covered event, or that repairs cost less than claimed.
• Limits and deductibles. The loss is covered but the amount falls below the deductible or exceeds a limit.
• Misstatements on the application. The insurer says information given when buying the policy was wrong or incomplete. The consequences depend on the facts and on state law.
• Health plan rules. Common reasons include that a service was not medically necessary, needed prior authorization, was provided out of network, or was considered experimental.
• Suspected fraud. Insurers investigate claims they suspect are fraudulent. Being honest and consistent protects you.

Some denials are correct. Others reflect a misreading of the policy, missing paperwork or a simple error. The only way to tell is to read carefully and check the reason against the documents.

Read the denial letter line by line

A denial letter is the most important document in this process, and it is worth reading slowly, more than once, with a pen.

Look for these items:

1. The stated reason for the denial, in the insurer's words.
2. The policy language quoted or cited. Find it in your policy and read the sentences around it, including definitions, exceptions to exclusions, and endorsements that may change the wording.
3. Facts the insurer relied on. Are they accurate? Does the letter mention an inspection, a report or a record you have not seen?
4. What the letter says is missing, if anything, and whether you can supply it.
5. Your review rights and deadlines: how to appeal, where to send it, whether the appeal must be in writing, and the time limit.
6. Contact details for the person who made the decision and for the appeals department.
7. Regulator information. Many states require insurers to include contact information for the state insurance department in denial letters.

Make a note of anything that does not match your understanding. If something is unclear, write to the insurer and ask for an explanation of the specific provision and how it applies to your facts. Keep the reply.

Request your policy and claim file

To respond well you need the documents the decision was based on. Ask in writing for:

• A complete copy of your policy, including the declarations page and all endorsements in effect on the date of the loss.
• The claim file materials the insurer is willing or required to provide, such as inspection reports, photographs, estimates, expert opinions and notes of interviews.
• Any documents or standards the insurer relied on in reaching its decision.

What you can obtain depends on the type of insurance and on state law. In some situations, for example many health plans, the law requires the plan to give you, on request, documents relevant to your claim free of charge. In others, you may need to ask politely and follow up, or rely on the regulator to request them for you. Even where a full claim file is not guaranteed, asking is reasonable, and the response, or lack of one, is worth recording.

Keep your request short and clear. Include your name, policy number, claim number and the date of the decision, say what you are requesting and ask for a response by a specific reasonable date. Send it in a way that gives you proof of delivery.

Internal review and reconsideration

Most insurers and health plans have an internal process for asking them to look again. It may be called an appeal, a reconsideration or a request for review. It is often the quickest and cheapest way to fix a mistake, and in some cases it must be used before you can take other steps.

A strong request is short, factual and organized:

1. Identify the claim: your name, policy and claim numbers, date of the loss and date of the decision.
2. State what you are asking for: reconsideration of the denial, payment of a specific amount, or both.
3. Say why you disagree, pointing to specific policy language and specific facts. For example: "The letter says the damage resulted from long-term leakage, but the plumber's report, enclosed, states that the pipe burst suddenly on the date in my claim."
4. Enclose new evidence: photographs, estimates, reports, records, and letters from professionals where helpful.
5. Cite the deadline in the letter and request a written decision.
6. Keep a full copy and proof that you sent it.

Keep the tone calm and professional. Emotion is understandable, but a clear, dated record does more than an angry letter. If the appeal is denied, ask for the written reasons and whether there is a further level of review.

Health insurance: internal appeals and external review

Health plans follow somewhat different rules. For many plans, federal law gives you the right to an internal appeal of a denied claim and, if the plan still denies it, the right to an external review by an independent organization. HealthCare.gov describes both steps and notes that an insurer is required to accept the external reviewer's decision. The details that matter most are deadlines and what kinds of denials qualify.

As HealthCare.gov explains for private plans, an internal appeal generally must be filed within 180 days of receiving notice that a claim was denied, and the insurer generally must complete the appeal within 30 days for a service you have not yet received or 60 days for a service you already received. A request for external review generally must be made in writing within four months after the final denial from the insurer. If the situation is urgent, expedited processes exist. Your denial notice and plan documents should state the deadlines and contacts that apply to you, and they control.

Plans differ. Employer plans, Medicare, Medicaid and state-regulated individual and group policies can have their own rules. Start with the notice you received, which is required to explain your appeal rights, and contact your state's consumer assistance program or department of insurance if you need help understanding it.

Complaints to your state insurance regulator

Your state's department of insurance supervises insurers that sell in the state and accepts complaints from consumers. The NAIC explains that delays, denials and unsatisfactory settlements are among the most common reasons people file complaints, and it points consumers to their state department through its consumer site.

A complaint is different from an appeal. An appeal asks the insurer to change its decision. A complaint asks the regulator to look at whether the insurer followed the law and the terms of your policy. Regulators generally cannot act as your lawyer or award damages, but complaints can prompt the insurer to review its position and can be recorded in regulatory files. The process is usually free.

To prepare a complaint, gather your policy, the denial letter, your timeline, your contact log and supporting documents, and write a short account of what happened and what you are asking for. Most departments offer online forms. You can file a complaint and use the insurer's internal review at the same time. Ask the regulator whether filing will affect any deadlines. It generally does not stop the time limits that apply to legal action.

Watch for contract time limits

Two kinds of time limits catch people out. One is set by statute for bringing a lawsuit, which differs by state and claim type. The other is written into the policy itself: some policies include a clause requiring any legal action to be started within a stated period after the loss or after the claim is denied. That period can be shorter than the period the statute would otherwise allow, and courts in different states treat such clauses differently.

Internal appeals and regulator complaints do not necessarily pause either clock. That is why it is sensible to find the suit-limitation language in your policy early, note the date of the loss and the date of the denial, and ask a licensed attorney in your state which time limits apply to you. Doing this does not commit you to suing anyone. It simply means you will know what your options are before they expire.

Strengthen your response with evidence

If the reason for denial is "not enough proof," your response is simple in theory: supply proof. If the reason is a dispute about cause, cost or medical necessity, your best evidence comes from a qualified third party.

• For property and vehicle claims: written estimates from licensed repair professionals, inspection or engineering reports, and dated photographs.
• For health claims: a letter from your treating clinician explaining why the treatment is needed, along with clinical notes, test results and, where relevant, published guidelines the clinician relies on.
• For coverage disputes: the policy text, the endorsements that were in effect, and any communications from your agent describing coverage.

Our guide to how to document a claim explains how to organize this material. Send copies, keep proof of delivery, and list the enclosures in your letter so nothing is left out.

When to get legal advice

Many denials are resolved without a lawyer, but there are times when advice is worth seeking. Consider consulting a licensed attorney if a large amount or a serious injury is involved, if the insurer alleges misrepresentation or fraud, if it is cancelling your policy, if you suspect that the insurer is acting unfairly, if you are being asked to sign a release or a new document you do not understand, or if you are close to a deadline. Many attorneys offer an initial consultation, and some work on fee arrangements that depend on the outcome. Ask how fees and costs work before you agree to anything. Legal aid organizations and bar referral services can help people with limited incomes. Our guide on finding and vetting a licensed attorney explains how to get started.

What not to do

• Do not ignore the letter. Silence can mean you lose appeal rights when deadlines pass.
• Do not destroy or alter evidence. Keep damaged property, messages and documents.
• Do not exaggerate or invent. Misrepresentation can turn a fixable denial into a far worse problem.
• Do not sign new documents without reading them. Releases, waivers and authorizations may limit your rights.
• Do not rely on phone calls alone. Follow up in writing.
• Do not pay anyone upfront who guarantees a result. Nobody can promise the outcome of a claim.

A denial response checklist

1. Confirm in writing what was decided and why.
2. Note every deadline and put the earliest in your calendar.
3. Read the letter and policy language line by line.
4. Request your policy, endorsements and claim file.
5. Gather evidence that answers the stated reason.
6. File an internal appeal or request for reconsideration, in writing, before the deadline.
7. For health plans, ask about external review.
8. Consider a complaint to your state insurance department.
9. Check any contract time limit to sue and consider legal advice.
10. Keep copies of everything and a dated log of every contact.

Where to go next

Depending on your situation, several of our other guides go deeper. If your denial involves health coverage, see how to appeal a health insurance denial for internal appeals and external review. For help reading the policy language a denial relies on, read how to read an insurance policy. If a claim is stalled rather than denied, insurance bad faith and claim delays explains how delay is evaluated, and filing a complaint with your state insurance regulator describes the complaint process. Time limits can be short, so also read statutes of limitation and claim deadlines.

Frequently asked questions

Can I appeal an insurance denial more than once?

It depends on the insurer or plan. Many have one or two levels of internal review, and some health plans also provide external review by an independent organization. The denial letter or your plan documents should explain the levels and deadlines that apply to you.

Does filing a complaint with the state insurance department stop the deadlines?

Generally no. A complaint and an internal appeal can be pursued at the same time, and neither necessarily pauses the time limit for legal action. Ask the department and, if you are unsure, a licensed attorney.

What if the insurer says my claim is denied because of a pre-existing condition?

Rules differ by type of insurance and by state. For many individual and employer health plans, federal law limits the use of pre-existing condition exclusions. Read the denial letter for the exact reason and check the rules for your kind of plan with your state insurance department.

Is it worth appealing without a lawyer?

Many denials are resolved through a well-documented internal appeal, and regulators and consumer assistance programs help people who act on their own. If a large amount, a serious injury, an allegation of fraud or a looming deadline is involved, consider a consultation with a licensed attorney.

When to consult a licensed attorney

This article is general information. It cannot account for the facts of your situation, the wording of your policy or contract, or the law where you live. Consider speaking with an appropriately licensed attorney in your jurisdiction if any of the following applies:

• A deadline may be running, or you are unsure whether one applies.
• You have been seriously injured, or a large amount of money or property is involved.
• You have been asked to sign a release, waiver or settlement agreement.
• A claim has been denied and you do not understand why, or you believe you are being treated unfairly.

Legal aid organizations, bar association referral services and court self-help centers may offer free or low-cost help. See our guide to finding and vetting a licensed attorney.

Important legal notice

Verdicairn is an independent informational publication, not a law firm. Content is general educational information, not legal advice, and reading it does not create an attorney-client relationship. Laws vary by jurisdiction and change over time, so information may be out of date. For advice about your situation, consult an appropriately licensed attorney. Read the full disclaimer.

Sources and further reading

1. How to appeal an insurance company decision — HealthCare.gov
2. Internal appeals — HealthCare.gov
3. External review — HealthCare.gov
4. How to File a Complaint and Research Complaints Against Insurance Carriers — National Association of Insurance Commissioners (NAIC)
5. Find a lawyer for affordable legal aid — USA.gov

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