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What counts as bad faith insurance? 4 examples

On Behalf of | Jan 5, 2023 | Bad Faith Insurance

People purchase insurance policies to be protected when something bad happens. This can be a health issue, a car accident, fire, theft or death. Your insurance company should cover you in such events.

However, this is not always the case. Some companies are good at selling policies but may act differently when it comes to fulfilling their promises. When you send your claim, your insurer may act in bad faith, putting you at a disadvantage. Here are four potential examples:

1. Not responding to your demand letter

Insurance companies should respond to clients’ demand letters within a few weeks to a couple of months. However, if you don’t get any response for a prolonged period, they may have disregarded your claim. 

Human error may play a part in not responding on time. But ignoring your letter, even after you contact them to follow up, may constitute bad faith insurance.

2. Denying a claim without investigation

Upon receiving a claim, an insurer should start an investigation, which should take a reasonable period. You should be alarmed if a company refuses to investigate or fails to do a good job. Examples of signs of a substandard investigation are not collecting enough evidence, denying facts when you provide evidence and not communicating with you.

3. Paying less than you are rightfully due

Policy payouts are not the most exciting matters for some insurance companies. Thus, they may do their best to pay you less than you deserve, forcing you to pay for most of the damages.

4. The use of intimidation tactics against claimants

Some insurance companies have tactics to intimidate claimants into accepting less payouts or withdrawing claims. This can be considered acting in bad faith.

The behaviors of some insurers are harmful to policyholders. If you believe your insurance company treated you unfairly, determine the right moves to protect your rights.