How to Handle a Denied or Underpaid Claim

Filing claims with your insurer doesn't always yield positive results. However, a denied or underpaid insurance claim is not the end of the road — it is the beginning of a fight that Texas law gives you every tool to win. Here is exactly what to do step by step.

Step 1: Get the Denial or Underpayment in Writing

Demanding documentation is your first course of action following any unfavorable claim determination. Insurance companies must give you a clear explanation for their settlement offer under Texas law, and they must also explain the reason for refusal in your claim rejection notice. Ask for a detailed written explanation that includes the precise policy wording used to support the decision; this document serves as the basis for all subsequent challenges. You already have power if the insurer is unable to cite specific policy language to back up their claims.

Step 2: Get an Independent Estimate Immediately

Have a licensed contractor or public adjuster assess the damage and provide a detailed estimate — insurance adjusters may undervalue the true cost of repairs using outdated pricing or failing to consider all damage. Over 500+ large-loss claims totaling more than $250 million, public adjusters have built a track record of overturning wrongful denials and recovering settlements ranging from 30% to more than 3,800% above initial insurer offers — without unnecessary litigation. The gap between the insurer's estimate and independent contractor quotes is your most powerful negotiating tool.

Step 3: File a Formal Internal Appeal

A denial of your property damage coverage is not the end of your claim — you have the right to dispute the denial or any partial settlement you were offered by filing an appeal. Submit your independent estimates, photographs, contractor reports, and a written demand letter citing the specific policy language you believe supports your claim. Under the Texas Prompt Payment of Claims Act, the insurer must respond within defined legal deadlines — and every day they delay beyond those deadlines generates 18% annual penalty interest in your favor.

Step 4: File a TDI Complaint

Between January and March of 2025, more than 160,000 insurance claims were filed in Texas alone, accounting for around 20% of all insurance claims in the United States. Send a formal complaint to the Texas Department of Insurance at 800-252-3439 if your internal appeal is unsuccessful. In addition to creating an official record that supports any future legal action, TDI investigations exert regulatory pressure on carriers.

Step 5: Use the Appraisal Process

Senate Bill 458, which took effect January 1, 2026, now requires all Texas residential policies to include a formal appraisal provision — giving you a structured, non-litigation path to contest any valuation dispute. The appraisal process involves each side selecting an independent appraiser, with a neutral umpire resolving disagreements — and it's often faster and less expensive than litigation while producing significantly better outcomes than accepting the insurer's first offer.

Step 6: Hire an Attorney When Necessary

Claimants represented by attorneys receive significantly higher settlements than those who negotiate alone — even after attorney fees are factored in. Most Texas property damage attorneys work on contingency — you pay nothing upfront and nothing unless they recover money for you. Consult a lawyer before accepting a settlement, especially for larger claims involving property damage, serious injury, or business interruption.