Homeowner’s insurance is both a protective investment and a necessity for many property owners. When someone finances a purchase, either with a mortgage or through seller financing, obtaining homeowner’s insurance is usually a requirement to complete the transaction. Many homeowners also have to make deposits to an escrow account each month to ensure they have enough funds in reserve to renew their policy each year.
Even those who do not have a financial instrument attached to their home may still want to invest in homeowner’s insurance to protect themselves from liability if someone gets hurt and financial devastation if something happens to their property. Homeowner’s insurance can pay to repair damage caused by extreme weather or by criminals, for example.
Unfortunately, sometimes claims against homeowner’s insurance policies don’t result in appropriate compensation. In some cases, a low payout could be a form of bad faith on the part an insurer.
Policyholders deserve the coverage they purchased
There are both federal and state statutes regulating the insurance industry. The law specifically requires that insurance companies handle the policy underwriting and claims processes in good faith. They should not offer coverage unless they are willing to accept the risk, and policyholders should be able to receive the coverage that they purchased if they ever need to make a claim.
When insurance companies operate in bad faith, they deny people the coverage they deserve and open themselves up to legal action. Some forms of bad faith insurance are very obvious. Insurance companies deny valid claims or take an unreasonable amount of time to resolve the claim. Other times, an insurance issue falls into a bit of a legal gray area. Low settlement offers are an example of bad faith insurance practices that people often fail to recognize. If an insurance company only pays a portion of what it will cost to repair a home despite someone investing in sufficient coverage, that could be an example of bad faith insurance practices.
Homeowners who believe that the response to their claim denied them the coverage they deserved can sometimes take legal action against their insurance providers. Bad faith insurance claims can increase the compensation that someone receives and may even result in additional financial penalties for the insurance company that did not uphold its policies appropriately.
For those who believe that an insurance company may have acted in bad faith, reviewing a policy carefully is often the first step that they should take. Recognizing bad faith on the part of an insurance company may help people fight back against unfair claim denials and low claim payouts if they need and deserve funds to repair their property.