Business insurance is designed to protect your company from financial losses due to accidents, legal disputes, and other unexpected events. However, not all claims are approved, and a rejected claim can leave businesses facing significant financial burdens. Understanding the common reasons for claim denials and how to prevent them can help ensure you get the protection you need when it matters most.
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Incomplete or Incorrect Information
One of the most frequent reasons for claim rejection is providing inaccurate or incomplete information when applying for insurance or filing a claim. This includes misstating business activities, underestimating revenue or the number of employees and omitting previous claims history.
You can avoid this by being honest and thorough when completing insurance applications. You should regularly update your policy to reflect changes in your business operations and double-check all claim forms before submission to ensure accuracy.
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Lack of Proper Documentation
Insurance companies require clear evidence to process claims. If you don’t provide sufficient documentation, your claim may be delayed or denied. You can avoid this by keeping detailed records of assets, receipts, and invoices. You should take photos of damaged property and provide incident reports when applicable as well as maintain accurate employee and financial records.
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Exclusions in the Policy
Not all types of losses are covered by standard business insurance policies. If your claim falls under an exclusion, it will likely be denied. Read your policy carefully and understand what is and isn’t covered – you should also consider additional coverage for specific risks, such as cyber insurance or business interruption insurance. If you’re unsure, you can discuss your needs with our team to ensure you have the right protection.
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Late or Delayed Claims
Most insurance policies have strict time limits for filing claims. If you wait too long, your claim could be denied, or if you try to claim for a time period that your policy doesn’t cover, this can also result in a rejection. You should always report incidents to your insurer as soon as they occur. Keep a record of all communications with your insurance provider and ensure employees understand the importance of timely reporting.
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Failure to Mitigate Losses
If an insurer believes you didn’t take reasonable steps to prevent further damage or loss after an incident, your claim could be denied. If you find that you need to make a claim, you should take immediate action to reduce damage, such as boarding up broken windows after a storm. You should also keep records of mitigation efforts, including repair quotes and temporary fixes, and any prevention methods that you have put in place before the issue occurred.
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Non-Compliance with Policy Conditions
Business insurance policies often have specific conditions, such as regular maintenance, security requirements, or health and safety compliance. Failing to meet these conditions can result in a denied claim. To avoid this, you should follow all policy requirements, such as installing security systems or conducting regular equipment maintenance where required. You should always keep records of compliance efforts and inspections and train employees on safety protocols and risk management.
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Disputes Over Liability
If an insurer disputes who is at fault in a claim (e.g., a liability claim involving a customer injury), they may reject it. This may depend on the cause of the incident, the claim being made or who is making it and the nature of your policy. We can help you find the best policy for your business, but you should also gather evidence, such as CCTV footage or witness statements and you can also consult with a legal professional if liability is unclear.
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Underinsurance or Insufficient Coverage
If your business is underinsured, your claim may not be fully paid, or it could be rejected altogether. Avoiding underinsurance is simply a case of making sure the information you provide to insurers is as accurate as possible. You should regularly review your coverage to ensure it matches your business’s growth. Consider business interruption insurance if a temporary closure would affect revenue and work with our insurance professionals to assess risks and coverage needs.
Understanding why business insurance claims are rejected can help you avoid common pitfalls and ensure you receive the coverage you expect. By keeping accurate records, understanding policy exclusions, and complying with insurance requirements, you can increase the likelihood of a successful claim.
If you’re unsure whether your current policy provides the right level of protection, speak to Ashburnham Insurance on FREEPHONE 0800 1696137 to review your coverage and avoid unexpected claim denials.