Prompt Payment Requirements in Texas
Under Texas law, insurance companies must follow strict deadlines when handling and paying claims. These rules are found in the Texas Insurance Code Chapter 542, often called the “Prompt Payment of Claims Act.” The law is designed to prevent insurers from delaying, underpaying, or ignoring valid claims.
Step 1: Acknowledging the Claim (15 Days)
Once you file a claim, the insurance company must acknowledge receipt of the claim, begin investigating, and request any necessary documents within 15 calendar days. If the insurer needs additional information (such as repair estimates, photos, or proof of loss), they must notify you within that same 15-day window.
Step 2: Accepting or Denying the Claim (15 Business Days)
After receiving all required documentation, the insurance company generally has 15 business days to accept or deny your claim in writing.
If the insurer cannot make a decision within that time, they may extend the deadline by up to 45 additional days, but they must explain the reason for the delay in writing.
Step 3: Paying the Claim (5 Business Days)
Once the claim is approved, the insurer must issue payment within 5 business days. If the insurer fails to meet these deadlines, it may be required to pay interest on the claim amount—typically 18% per year, plus reasonable attorney’s fees if legal action becomes necessary.
Special Situations and Exceptions
Some claims may have slightly different timelines. For example:
- Claims involving weather catastrophes may allow limited flexibility.
- Surplus lines insurers may operate under modified rules.
However, most standard homeowners, auto, and commercial policies must comply with Chapter 542 deadlines.
What If the Insurance Company Delays?
If your insurer exceeds these deadlines without a valid justification, it may be acting in violation of Texas law. Delays, lowball offers, or repeated document requests can sometimes signal a bad-faith claim handling issue. Keeping records of all communications and dates is critical if a dispute arises.
Conclusion
In most cases, a Texas insurance company must acknowledge your claim within 15 days, decide within 15 business days after receiving the required documents, and pay within 5 business days of approval. If it fails to do so, the law provides financial penalties designed to protect policyholders.
