Insurance companies collect premiums without any guarantee of ever providing direct support for policyholders. Still, most people view an investment in disability insurance as worthwhile, especially if they are the primary wage earner for their household because it will provide a higher standard of living than Social Security benefits would in the event that they sustain significant physical harm. Some people even select jobs based on the benefits package that employers provide and the availability of supplemental disability coverage.
Regardless of whether someone has purchased their own policy or benefit employer-sponsored coverage governed by the Employee Retirement Income Security Act of 1974 (ERISA), they probably expect a simple claims process when they have an illness or an injury that keeps them from working. Unfortunately, insurance companies sometimes operate in bad faith, meaning they intentionally seek to violate the terms of their policies to avoid financial expenses. These are two of the more common ways that bad faith insurance might affect a disability claim?
An unfair denial
Having a claim rejected by an insurance company can be a very stressful experience. Individuals with no income and worried about their finances may begin to panic when they hear that the insurance company will not provide them with the disability benefits that they deserve. After reviewing their policy documents, they firmly believe that their circumstances warrant benefits. These individuals may need to appeal the decision or prepare for a bad faith claim against the insurance company.
An unreasonable settlement
Disability benefits often come in the form of weekly or monthly payments. The funds received from the disability insurance policy effectively replace someone’s regular paychecks. Those benefits could last for a set number of weeks or until someone reaches retirement age, depending on the terms of their policy. Insurance professionals eager to minimize what the company pays on a claim might try to trick a policyholder into accepting a very low settlement.
Receiving a one-time payment at the beginning of the claims process can seem like a good solution for those who have accrued large balances with their creditors or who have waited some time for their benefits to start. However, settlement offers typically indemnify the insurance company against future obligations and are often far less than the full benefits someone could receive based on their policy paperwork.
When people believe that an insurance company may have acted in bad faith, regardless of whether it is an ERISA-governed policy or not, they may need help negotiating with the company or holding it accountable for its bad-faith practices. Recognizing warning signs of misconduct during a disability insurance claim may inspire someone to get the legal support they need to secure the coverage that they deserve.