Insurance policies are designed to provide financial protection during unexpected events, whether it’s a car accident, medical emergency, or damage to property. However, insurance companies in New Jersey are not obligated to approve every claim. In some situations, insurers are legally allowed to deny coverage. Understanding when and why coverage may be denied can help policyholders protect their rights and respond effectively.
Material Misrepresentation or Fraud
One of the most common reasons for denial of coverage is misrepresentation—when a policyholder provides false or misleading information on their application or during the claims process. In New Jersey, if an insurance company discovers that the policy was issued based on incorrect or incomplete facts, they may legally cancel the policy or deny a claim. For example, if a person lies about their driving record or fails to disclose pre-existing medical conditions, the insurer can argue that the policy was obtained under false pretenses.
Fraudulent claims—such as staging an accident or exaggerating damages—can also lead to denial and even legal consequences, including criminal charges.
Lack of Coverage Under the Policy Terms
Insurance only covers what is explicitly included in the contract. If a claim falls outside the scope of the policy, the insurer has a valid reason to deny it. For example:
- A standard homeowner’s policy may not cover flood damage unless separate flood insurance is purchased.
- Cosmetic surgery is typically not covered by health insurance unless it is medically necessary.
- Damage caused by wear and tear is not usually covered under auto or property insurance.
New Jersey law requires insurers to provide clear explanations when coverage is denied for this reason, and policyholders should review their contracts carefully to understand what is—and isn’t—covered.
Lapsed or Canceled Policies
If the policyholder fails to pay premiums on time, the insurer may cancel the policy due to non-payment. Any claims made after a policy has lapsed will be denied, even if the event occurred just one day after the policy expired. Insurance companies in New Jersey must provide advance notice of cancellation, typically 10 to 30 days depending on the type of policy, giving policyholders a chance to reinstate their coverage.
Violation of Policy Terms
Insurance contracts often include conditions that must be met for coverage to apply. Violating these terms can lead to denial. Common violations include:
- Failing to notify the insurer promptly after an incident
- Not cooperating with the investigation (e.g., refusing to provide documents or attend medical exams)
- Making unauthorized repairs before an insurance adjuster assesses damage
Even unintentional violations can result in denied claims, so it’s critical to follow the insurer’s guidelines closely.
Exclusions and Limitations
Most insurance policies contain exclusions—specific situations or risks that are not covered. For example:
- Intentional acts, like deliberately setting a fire
- Damages from illegal activities
- Business use of a personal vehicle without proper endorsement
Policyholders in New Jersey should pay special attention to the exclusions section in their contracts, as insurers can deny coverage based entirely on these limitations.
How to Respond to a Denied Claim
If your insurance claim is denied in New Jersey, take the following steps:
- Request a written explanation of the denial.
- Review your policy carefully to verify the insurer’s reasoning.
- Gather documentation supporting your claim.
- File an internal appeal with the insurance company.
- Contact the New Jersey Department of Banking and Insurance (DOBI) if you suspect unfair denial.
- Consult an attorney for further legal action if necessary.
Conclusion
Insurance companies in New Jersey have the legal right to deny coverage under specific circumstances, such as fraud, lapsed policies, and uncovered claims. However, policyholders also have legal protections and the ability to appeal unjust denials. Being informed about your rights and obligations as an insured party is the first step to ensuring fair treatment when filing a claim.