How bad faith insurance laws protect policyholders and claimants

You pay for an insurance policy because you want protection if you get into a car crash or someone gets hurt while visiting your house. Insurance can protect you both from personal losses and from liability for the losses of others.

Limiting your personal risk and financial liability protects your income and major assets like you’re home from claims if someone gets hurt. Coverage also protects you from direct losses such as the costs to repair storm damage to your home, depending on the kind of insurance policy involved.

Insurance companies don’t always follow the rules

Whether you need reimbursement from your homeowner’s policy or medical coverage from another driver’s car insurance after they caused a serious crash, you need to be able to trust that insurance companies will pay what they should invalid claims.

Unfortunately, some companies will engage in bad faith insurance practices. They deny claims, delay them or intentionally underpay them. Being able to hold them accountable for those bad faith practices is of the utmost importance for both policyholders and claimants.

A bad faith insurance claim can reverse a company decision

Perhaps the most important part of a bad faith insurance claim is that it allows the court to review a claim decision and possibly reverse it. If there was coverage available and the company either wrongfully denied a claim or paid out less than what they should have given the circumstances, the courts can intervene. Those dealing with extensive property damage or the consequences of personal injuries can connect with the coverage that they need. 

Bad faith insurance claims can also create consequences for the company

Companies that deny or minimize valid claims often do so because of a profit motive. Those who bring a successful bad faith insurance claim against an insurance company can ask for punitive damages in addition to payments of the claim.

In some cases, punitive damages can be significantly higher than the amount of the claim itself. The standards and restrictions on punitive damages differ from state to state, but some kind of punitive award is often possible. Understanding is a policy that applies to your claim is often the first step toward evaluating whether you have a solid case for a bad faith insurance claim.

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