Insurance coverage helps protect people from liability and unexpected losses. For property owners in Texas, insurance is often mandatory. Mortgage companies typically require coverage as a contingency of financing a transaction.
Even those who own their homes outright often carry insurance to protect themselves against liability in case a visitor gets hurt or to ensure they can pay to repair substantial damage caused by unpredictable weather.
Many policyholders go years without needing their coverage, but some people may need to file sizable claims. They may then find themselves fighting with the insurance company. Insurance providers often try to avoid financial responsibility through manipulative or even illegal tactics. Dragging out an insurance claim is a common manifestation of bad faith insurance practices.
What is bad faith insurance?
Federal and Texas state laws mandate that insurance companies uphold their policies in good faith. Doing so means approving claims for covered losses in a timely fashion. It also means upholding the terms of the policy even if the claim leads to a substantial payout.
In Texas, insurance companies have to handle claims in a timely fashion. Some companies drag out the claims process in the hopes that people may give up out of frustration. Texas state law imposes very strict turnaround times for businesses responding to pending claims.
Typically, insurance companies have to respond to the initial claim within 15 days. They have to acknowledge it and send the necessary proof of loss documents to the policyholder. Once the policyholder fills out and submits that paperwork, the company must respond to the claim in a timely fashion.
Usually, the company has another 15 days to approve or deny the claim. In complex scenarios requiring an investigation, the company can request an extension. After approving a claim, the company usually has five business days to pay the claim in full. These rules help ensure that property owners aren’t left without the resources necessary to repair a home or obtain alternate arrangements until their home is safe to occupy again.
Ignoring a claim, refusing to provide necessary paperwork, delaying a decision on a claim and withholding payment after approving a claim are all examples of bad faith insurance practices. Policyholders facing unfair denials and lengthy claims may have grounds to take legal action. Holding an insurance provider accountable for bad faith practices can help people obtain the coverage they need and deserve.
