Common Reasons Why Insurance Claims are Declined: Insider Report Part 2 

While insurance can give you peace of mind when accidents happen, it’s important to read the fine print of your policies before you choose to buy or renew. Just assuming your insurance covers you for every single outcome can lead to costly mistakes.  

This is the second part of our insider look at insurance claims and the common reasons why they may get declined. In Common Reasons Why Insurance Claims are Declined Part 1, we delved into Public Liability insurance and Professional Liability insurance. In this second part, we’re taking a close look at Personal Accident and Illness, Contents and Theft insurance. 

Personal Accident and Illness insurance

Personal Accident and Illness insurance can provide cover should you become permanently disabled or pass away as a result of an accident. Cover can also include a weekly benefit for loss of income (limits apply) if you are unable to work as a result of an unexpected injury or illness, even if it occurs outside of your employment. 

Professional Accident and Illness cover is often taken out by sole traders and other businesses who are heavily reliant on generating their own income.

Pre-existing illness or injury

One of the most common reasons why Personal Accident and Illness insurance claims are rejected is because the insured is trying to claim a pre-existing injury/illness.  

If a known issue exists before the commencement of the insurance, then it is very often not included in the cover and will frequently result in the claim being denied.  

Case study: Personal Accident and Injury insurance (injury only) claim example – Tradesperson. 

Background: The insured, a handyman by trade, submitted a claim under their Personal Accident and Injury policy for a T9 compression fracture and T7/8 and T8/9 disc bulges, resulting from a go-kart accident and a fall at work roughly 2 months later. 

Response: As part of the insurer’s assessment of the insured’s claim, they obtained medical records from all treating doctors of the insured and appointed an independent medical doctor to complete an assessment of the insured’s injury.  

On review of the medical information received, the evidence suggested that the back issues were an aggravation of a previous back condition dated 7 years.  

The independent medical doctor determined that the claimed condition was related to a pre-existing condition. The claim was declined based on this professional opinion and the medical evidence.

Theft insurance 

Theft insurance can cover your contents, stock or from theft, attempted theft or armed hold up. Theft insurance is part of a Business Insurance Pack.  

No sign of forced entry 

It is not uncommon for theft insurance to require the item stolen to have been securely stored before the theft and for there to be evidence of forcible or violent entry in the commission of the theft. 

Therefore, Theft insurance will not cover a business in the case of shoplifting, or if thieves entered the premises because a door was left unsecured by the insured business. This is one of the most common reasons why Theft insurance claims are denied.  

Case study: Theft insurance claim example – Aquarium Retailing. 

Background: An aquarium business reported a theft incident involving a person who entered the shop, took two large aquarium canister boxes, and exited without making payment. The individual entered the premises during business hours, presenting as a customer, and no forcible or violent entry was involved. 

Response: Because there was no violent or forced entry, the claim of theft was declined. Specifically, the policy states that the insurer does not have to “pay for loss of or damage to stock.”

Contents insurance 

Contents insurance is designed to covers a business for damage to contents and stock due perils listed within the policy wording, such as a fire, malicious damage or storm damage. Contents insurance is part of a Business Insurance Pack. 

Optional flood insurance not included 

In many cases of Contents insurance, flood cover is an optional extra. If a business has not taken out optional flood cover, then their Contents policy will exclude flood damage. To ensure your contents is covered against flood damage, you will need to take out optional flood cover. 

Flood cover is not automatically included in insurance policies and is assessed and underwritten by each insurer on an individual basis. 

Theft is not a part of Contents insurance 

In other instances, people mistakenly believe that Theft insurance makes up part of their Contents insurance. However, as outlined above, Theft insurance is its own type of cover. Therefore, if a business’s contents or stock are damaged or stolen because of theft, then they will not be covered by Contents insurance.  

BizCover makes insurance easy for small business owners 

When you research insurance or make the decision to buy insurance, it’s important to fully understand what is and isn’t covered.  

BizCover has made it our mission since 2008 to make quoting, buying, renewing and claiming insurance easy for small businesses.  

You can jump onto our website and search for different business insurance policies from some of Australia’s leading insurance providers. Getting multiple quotes is simple and only takes a few minutes. Plus, if there’s ever something that you’re not sure about, then our friendly team is here to help answer your questions.  

By knowing exactly what your cover includes, you can make smarter business decisions, avoid insurance gaps and choose the policies that can help support your business. 

For on the go cover, go BizCover. 

This information is general only and does not take into account your objectives, financial situation or needs. It should not be relied upon as advice. As with any insurance, cover will be subject to the terms, conditions and exclusions contained in the PDS or policy wording. 

The provision of the claims examples are for illustrative purposes only and should not be seen as an indication as to how any potential claim will be assessed or accepted. Coverage for claims on the policy will be determined by the insurer, not BizCover. 

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