Has your insurer ever rejected your claim?

Perhaps not, but you must have heard of someone complaining about it.

As I explain below, there are several justifications for rejecting an insurance claim and contrary to the common perception that “insurers always try to avoid paying claims” most insurance companies in Cyprus are generally fair in settling claims against them.  So, if you don’t want your claim to be rejected try to avoid the following mistakes:

Is your policy valid?

The mere fact that you have an insurance policy in your hand does not necessarily mean that it is valid!  If, for instance, it is unpaid, you may run the risk that the cover has ceased and therefore any claim that arises will be automatically rejected.  In addition, if your insurance policy’ s effective period is coming to an end, make sure you renew it in a timely manner.  Do not rely entirely on your insurance intermediary in order to avoid unpleasant surprises.

Submit your claim on time and in writing!

Most insurance policies mention the claims process that you must follow i.e. what to do in case of a damage, loss or injury.  The rule is that you must notify your insurance company in writing – usually by filling up a specific Claim Form – as soon as possible and not later than the specified period of time mentioned into your insurance policy.  Do not delay in submitting your claim and make sure you save all evidence in relation to your damage, loss or injury.  Otherwise, you are running the risk of your claim being rejected.

Have you checked your deductible?

Almost all insurance policies exclude an initial amount (either fixed or by a percentage) in the event of a damage or loss known as deductible or excess.  This varies depending on the type of policy, insured risk and insurance company.  If your claim does not exceed the deductible or excess, it is obviously automatically rejected.

No deceit!

Do not try to deceit your insurer in any way because in case you get caught, your claim may be entirely rejected.  A real case scenario: a home insurance policy holder, whose house was extensively damaged by fire, claimed his insurer by providing – among other things – a fake receipt.  His claim was settled but afterwards, when the insurer had discovered the fraudulent document, he was sued and the entire compensation money was returned to the insurer!

Disclose all material information and do not misrepresent during the inception of insurance!

Any information that is relevant and increases the risk undertaken by your insurer may be considered as material information.  You have a legal obligation to disclose any material information to your insurer during the inception of your insurance policy (or renewal and/or modification).  Material information is considered to be any information that would affect the judgement of a reasonable and prudent insurer, had he been aware of it before the inception.  In addition, you are under the obligation to answer correctly all the questions asked by your insurer (usually these are found in insurance proposal form).

Therefore, if for instance, your house had been flooded in the past and you omitted to disclose this information to your insurer while taking out your home insurance, in case of a claim you run the risk of your claim history being revealed thus your claim being rejected.  Or, in another example, if one of your hobbies is a scuba diving and you do not mention it on your personal accident insurance proposal form, then you run the risk of having your future claims rejected.

Do you have an insurable interest?

Insurable interest is a prerequisite for being entitled to make a valid claim to your insurance policy.  You need to have an insurable interest in the subject-matter of insurance (house, car, life etc.) i.e. in case the subject-matter is lost or damaged, you must be able to demonstrate that you will suffer some financial loss.  This means that you cannot insure the life of your neighbour, nor the car of your best friend and generally anything that does not belong to you, although you may insure property which is under your possession or control.

As to the question: when must the insurable interest exist?  The answer is: it depends on the type of insurance.  Sometimes at the inception of the insurance policy, sometimes at the occurrence of the loss or damage and sometimes at both: inception and occurrence of the loss or damage.

Was the proximate cause an insured peril?

This is a frequent reason for rejecting a property insurance claim: the damage (or loss) was not caused by an insured peril.  Insurance policies – with the exception of all-risks policies – are named risked policies.  Therefore, if for instance, your home was burgled, the mere fact that you had a home insurance does not necessarily mean that you are covered.  Make sure that ‘theft’ is one of the insured perils mentioned into your insurance policy.

Does your claim fall under the exceptions of your insurance policy?

Let us take the previous example: your home contents were stolen however, there is no sign of any violent entry into your house.  The thieves must have got their way in through an open house window.  Probably your insurance policy will exclude this scenario and your claim will be rejected.

Did you breach any warranty?

Consumer’s insurance policies rarely include warranties.  These usually appear in commercial risks insurance policies such as factories.  If, however, they do appear in your policy make sure you comply with them. 

Example: a fire broke out in the night destroying completely an insured workshop.  The insurance policy contained a warranty that a certain number of fire extinguishers ought to be in place in a fully operational condition.  At the time of the claim, there were fire extinguishers in the workshop but they had not been maintained for some years and could not be used effectively.  Hence, the warranty was breached and the claim can be rejected, despite the fact that the fire broke out during the night when there was no one to use the fire extinguishers.

The burden of proof is on you!

Your claim may meet all the requirements to be accepted, however, there is one last thing missing: can you prove your damage?  You do not necessarily need to keep record of every single receipt of purchase but you will need to prove that the amount you claim is the correct one. 

Having said that, presenting a receipt of purchase may not suffice.  If, for example, you present a receipt of a computer that you bought 5 years ago, the value on the receipt does not reflect the current value of the computer at the time of the claim.

There is no other excuse!

If none of the above-mentioned has been invoked and – yet – your claim has been rejected, then your insurer is probably unfair.  In such case you may file a complaint to the Financial Ombudsman or seek for a legal advice.