What can you do when insurance underpays your claim?

| Jul 21, 2021 | Property Claims

Every month, part of your mortgage payment goes into your escrow account to cover your homeowner’s insurance. If you own your house outright, you probably set money aside frequently to pay your annual homeowner’s insurance premium, which could cost hundreds or possibly thousands of dollars.

You may also invest in hurricane insurance, flood insurance and other supplemental coverage to protect your Florida property from depreciation and damage. After years of making timely payments on your premium, you suddenly need to make a claim.

Perhaps you need to address flooding damage to the lower part of your home or replace your roof. Your insurance company should appropriately pay claims that fall clearly under the policy’s coverage. Do you have any rights when the insurance company underpays your claim?

Homeowners may not realize how inappropriate an offer is at first

When a major storm or flooding incident damages your property, filing an insurance claim is probably your first instinctual response. As soon as you hear back from the company with an offer, you may gladly accept it or immediately cash the check.

It is only after work starts on your property or more bills keep piling up that you realize you didn’t receive enough payment. When you go back to the insurance company, they inform you that they have already settled the claim and have no intention of paying you anymore. They may point to your signing a settlement agreement or cashing the check as evidence that they don’t have any financial liability for your losses anymore. Does that mean you just have to take a loss because they tricked you?

Intentionally underpaying a claim is a bad faith insurance practice

Both state statutes and common law establish the obligations of insurance companies to policyholders and those who make a claim against one of their policies. As a homeowner paying for your own insurance, you may have to bring a first-party bad faith insurance claim against the company if they do not work with you after underpaying your claim.

Typically, you have to provide them with 60 days’ notice before going to court. However, you can ask the court to intervene and approve your claim. You might even be able to seek punitive damages for their bad faith practices.

Understanding your rights after an underpaid claim can help you get the compensation you bought with your insurance policy.

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