Is my car insurance company allowed to do that?

confused woman

When you buy car insurance, you’re covered no matter what, right? Ads with friendly lizards and teleporting agents make it look like your insurance company is on your side. The truth, unfortunately, is that insurance companies have their own reasons to deny you the services you think you’ve already paid for.

When you pay a premium to an insurance company, it goes into a pool of money that everyone who’s insured by that company should be able to draw from in the event of an accident. When many people pay money into the system and few people take it out, the insurance company turns a profit. The problem: in this system, insurance companies have a strong incentive to minimize the number of people taking money out of the pot, even when those people really need it. Unhappy customers aren’t a problem for insurance companies; since all insurance companies operate more or less the same way, drivers are left with no real alternative if they want to follow the law and stay insured.

5. Perform a credit check on you, and discriminate based on it.

Yes, your insurance company is running your credit history—and changing your premium based on it. According to insurance companies, credit behavior is a referendum on someone’s character: they argue that your credit history is tied to your willingness to pay your bills on time, and even your recklessness on the road. This means that low-income families, senior citizens, and people with financial troubles in their past may have to choose between overpaying for insurance or going without it.

4. Cancel your coverage if you’re unfortunate enough to need it.

You know that filing a claim with your insurance company may increase the cost of your premium. What you might not realize is that your insurance company is allowed to drop you if you even inquire about filing a claim. Yes, they can refuse renewal of your policy, or even try to immediately drop your coverage when you most need it.

3. Require you to see one of their doctors to prove you’re injured.

If you’re getting payouts from a PIP, or Personal Injury Protection, fund, you may find that your insurance company’s bottom line conflicts with your doctor’s advice. Your insurance company may force you to go to a so-called “Independent Medical Examination” to continue receiving your benefits. These doctors aren’t really independent—they’re hired and paid by insurance companies to ferret out people who they believe are getting too much out of the system. If these doctors don’t return consistently favorable results for insurance companies, they won’t get repeat work.

2. Use tactics they know will delay or confuse you.

If trying to read your contract with your car insurance company is giving you a headache, know that they wrote it that way on purpose. Between insurance-industry lingo and legalese, these contracts are deliberately written to be difficult for the average customer to understand. Insurance companies know that accident victims who are already confused and frustrated may be more willing to take a tiny check or give up their claim entirely just to end the process.

1. Deny your claims even when they know they’re valid.

Wait, hold up. You signed a contract with your insurance company to pay out on valid claims. They have to honor it, right? Not so fast. Your insurance company is probably using an incentive program to reward employees for successfully denying a claim even if they know that claim should be paid. That means claims adjusters are willing to try any tactic to avoid paying a claim or stall you, even if it’s clear that you have a case.