What Happens If You Ignore an Insurance Claim?

An insurance claim represents a formal request submitted by a policyholder to their insurance provider, seeking coverage or financial compensation for a loss or event stipulated within their policy. This process allows policyholders to receive financial compensation for covered losses. Whether one is the subject of a claim or the party initiating it, neglecting to engage with this process can lead to significant negative outcomes. Disregarding communications or failing to follow through on required actions can have widespread and unfavorable repercussions for an insured’s financial standing and future insurability.

Ignoring a Claim Filed Against You

When a claim is filed against an insured individual or entity by a third party, ignoring it can trigger severe consequences. Most insurance policies contain a “cooperation clause,” which contractually obligates the insured to assist the insurer in the investigation and defense of the claim. Failing to provide requested information, respond to communications, or participate in the defense of a claim constitutes a breach of this clause.

A breach of the cooperation clause often leads to a denial of coverage for the claim. If the insurer determines that the insured’s lack of cooperation has materially and substantially disadvantaged their investigation or defense, they may withdraw their obligation to cover the loss. This leaves the insured personally responsible for any damages awarded, legal judgments, or settlement costs. For example, if an insured fails to provide crucial documents or appears for a required examination under oath, the insurer may deny the claim.

Furthermore, the insurer may withdraw its legal defense, forcing the insured to hire and pay for their own legal representation. Legal fees for defending a lawsuit can be substantial. Without the insurer’s defense, the insured faces the full financial burden of litigation. This personal liability extends to any judgment or settlement amount, which could be substantial and include compensatory damages for the injured party.

Ignoring legal actions related to the claim can also result in a default judgment being entered against the insured. A default judgment occurs when a defendant fails to respond to a lawsuit within the legally stipulated timeframe, typically 20 to 30 days after being served. Once a default judgment is granted, the court accepts the plaintiff’s claims as true, and the insured loses the opportunity to present a defense or contest the allegations. This can lead to significant financial liabilities, as the judgment may allow the plaintiff to pursue asset seizure, wage garnishment, or other collection actions against the insured.

Ignoring a Claim You Filed

A policyholder who initiates a claim but then fails to follow through with their own insurance company can also face adverse outcomes. Insurance companies require specific information and documentation to process and validate a claim. If a claimant does not provide requested details, such as medical records, repair estimates, or property documentation, within the insurer’s specified timeframes, the claim process can stall.

In such instances, insurance companies will typically close the claim due to a lack of cooperation or insufficient information. This means the insurer ceases its investigation and will not issue any payment or benefits related to that incident. The claimant effectively forfeits their right to compensation for the loss they originally reported. For example, if a homeowner files a property damage claim but fails to submit requested repair invoices or allow an inspection, the insurer may close the file.

Reopening a closed claim is challenging, often requiring new evidence or compelling justification for the previous non-response. The process often involves submitting a formal request and may require legal assistance to navigate. Without new, substantial information, insurers are often reluctant to revisit a claim they previously closed due to the claimant’s inaction.

Delays or a complete lack of response from the claimant can also hinder the insurer’s ability to properly investigate the incident. Over time, evidence can degrade, witnesses may become unavailable, or the ability to assess the full extent of the loss can diminish. This inability to thoroughly investigate makes it difficult for the insurer to verify the loss and its value, leading to a closed claim without payment. Consequently, the financial burden of the loss, whether it involves property damage, medical expenses, or other covered events, will fall entirely upon the policyholder.

Future Insurance Implications

Ignoring an insurance claim can have broader, long-term consequences that extend beyond the immediate financial and legal outcomes of the specific incident. A history of non-cooperation or claims closed due to lack of follow-up can negatively impact an individual’s relationship with insurance companies, as insurers view this as increased risk. This perception of higher risk can lead to increased premiums when renewing existing policies or seeking new ones.

A record of unresponsiveness or claims issues suggests a greater likelihood of future problems, leading to higher premiums. Premiums could see an increase ranging from a few percentage points to 20% or more, depending on the specific circumstances and the insurer’s underwriting guidelines.

In some cases, an insurer may choose not to renew a policy at the end of its term. This non-renewal can occur if the insurer perceives the policyholder as too high-risk, potentially due to a history of non-cooperation, multiple claims, or claims closed without resolution. While distinct from cancellation, non-renewal still means the policyholder must find new coverage, which can be a challenging process.

A history of uncooperative behavior or claims denied due to non-response can make it more difficult to obtain new insurance coverage from other providers. Insurers share certain risk-related information through industry databases, and a problematic claims history can flag an applicant as undesirable. This can result in fewer options for coverage, potentially higher rates, or even outright denial from some insurers.

Such issues can also negatively affect an individual’s insurance score, a proprietary rating used by insurers to predict the likelihood of future claims and influence premiums. A lower insurance score, often tied to credit history and claims behavior, can lead to higher costs across various insurance types.