3 Common Sources of Insurance Failure

Insurance failure occurs when your payment from your insurer does not cover the loss you incurred. You should check to ensure the failure is not illegal, meaning the insurer has denied your claim without cause. Aside from this devious practice, there are other common reasons for the failure.

#1 Exclusions

Exclusions are specific events that are not covered in your policy. For example, medical insurance policies typically have exclusions for injuries incurred during highly risky activities like bungee jumping or sky diving.

#2 Coinsurance Penalties

You have to declare the entire value of the property you are insuring in your property lines. If you do not, then you will only be covered for a given percentage of your loss. This percentage is discovered by estimating how much of the property value you are actually paying to insure. For example, insuring only $75,000 of a $100,000 asset means only 75% of any claim will be covered due to the coinsurance penalty.

#3 Misrepresentation on Application|

Lying on an insurance application can cause insurance failure in the future. For example, if you do not declare you are pregnant when applying for medical insurance, the company may deny you coverage for prenatal and postnatal expenses if they can prove you lied.

 

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