Did you know that the U.S. insurance industry recorded premiums totaling $1.28 trillion in 2020?
While most insurers are responsible and reliable, some providers may employ underhanded tactics to avoid their contractual obligations to their policyholders. But what is bad faith insurance, exactly?
If you’re taking out an insurance policy or reporting a claim on an existing one, you need to familiarize yourself with the concept of bad faith insurance. That’s where our helpful guide comes into play.
Read on for everything you need to know.
What is Bad Faith Insurance?
Bad faith insurance is when an insurer attempts to breach its contractual duties, either by refusing to pay out a genuine claim or failing to investigate and process a claim within a reasonable time frame.
Insurance firms can act in bad faith by misrepresenting a contact’s terms to avoid paying a claim or by failing to disclose policy restrictions and exclusions before selling a policy.
If a policyholder suspects bad faith, he or she should contact their insurance firm and consult an attorney. View more options for legal advice here.
Understanding Bad Faith Insurance
Bad faith insurance may apply to any insurance policy or contract, including home insurance, health insurance, vehicle insurance, and life insurance.
A disagreement between the claimant and the adjuster does not constitute bad faith unless the insurer refuses to offer clear reasons for their judgments. Neither does making a mistake by either party.
However, it is considered bad faith for insurance companies to gather or review evidence in a biased way. Bad faith isn’t always willfully – If an insurer fails to respond to a claim immediately, this negligence is also a type of bad faith insurance.
Fighting Bad Faith Insurance Explained
State laws addressing bad faith tactics are often known as unfair claims practices acts. They are intended to protect customers from unethical and malicious conduct.
Some states require bad faith insurance companies to compensate the victim for having a claim refused, in addition to the amount payable under the claim. This compensation includes total costs, lost wages, and attorney’s fees.
If an insurer acts particularly egregiously, a court may grant punitive damages to the policyholder to penalize the insurance company for its misconduct and deter it from committing future acts of bad faith.
What Is Bad Faith Insurance? Everything You Need To Know
So, that’s our bad faith insurance guide. With our bad faith insurance tips, you can stop asking ‘what is bad faith insurance?’ and defend your right to make a genuine claim today.
Your insurance is there to protect you when things go wrong. That’s why you need to know how to react when they act in bad faith.
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