What is an Insurance Coverage Letter?

 Insurance is essential to protect individuals, businesses and property from financial ruin. Many people purchase policies in order to receive peace of mind in knowing they can claim damages from their insurer if they are ever in need of financial support. However, some insurance plans contain a wide variety of exclusions that limit the insured’s ability to recover payment on a claim in whole or in part. In these situations, an insurance company may send a reservation of rights letter to the policyholder to indicate they are investigating a claim and that the carrier reserves the right to deny coverage.

When a person is shopping for insurance quotes, it is common to be asked to provide proof of previous coverage. This can be in the form of a letter from the insurance company or, in the case of an employer-sponsored plan, a loss of coverage letter. The purpose of these letters is to provide documentation that the person was a covered insured for a particular period of time and can be used to satisfy any requirements (such as proof of insurance for a vehicle) before being issued new insurance or surrendering the existing coverage.

Many times a reservation of rights letter is sent because the insurance company believes the policyholder’s claim is not covered by their current policies. This can be very concerning for the insured and requires that they carefully review the letter to determine whether or not they are still protected. Often, this type of letter is accompanied by other documents such as receipts, witness statements, physician records and police reports.