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Know the fundamental duties your insurance provider owes you

When you purchase an insurance policy, you do so to protect your finances in the event of a catastrophe. Unfortunately, insurance companies do not always act in the best interests of their clients. An insurance provider will sometimes offer less compensation than necessary, or deny a claim entirely.

If you have filed a claim with your insurance company only to have it denied, you may feel powerless. Claimants in this situation often believe that their insurance provider has the final say in the matter, but this is not true. You may not realize it, but you are entitled to have your insurance company provide several duties to you. If a company should violate any of these duties, it may constitute bad faith—and necessitate a lawsuit.

If you have filed a claim with your insurance provider, you should empower yourself by understanding the basic duties that your provider owes to you.

When investigating their policyholders’ claims, insurance providers owe the duty to:

  • Investigate

First, an insurance company has the duty to undertake a thorough investigation of your claim. It then owes you a comprehensive report of its findings as well as a valuation. It should also act as quickly as possible, without unreasonable delays. If a company fails to do any of these things, it may have acted in bad faith.

  • Indemnify

Insurers also owe a duty to pay a judgment or a settlement agreement that has been made against a policyholder. This is a basic tenet of insurance law, and is one of the major reasons why many people buy insurance policies in the first place. Failing to uphold this duty could be an example of bad faith.

  • Defend

If someone makes a claim against you, the insurance company has a duty to defend you against this claim in court. This holds true even if the lawsuit against you is not necessarily covered by your insurance policy. If an insurance company refuses or does not adequately defend a policyholder against a claim, it may have failed to fulfill its legal duty. In some jurisdictions, insurers also have a duty to offer a reasonable settlement if a lawsuit would be harmful to the policyholder.

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