Reservation of Rights
Definition:
A notice from an insurer stating they are investigating a claim but may later deny it.
Explanation:
This protects the insurer’s right to limit or deny coverage if exclusions apply. Homeowners should review these letters carefully.
Example:
If your insurer questions whether water damage came from a flood (excluded) or a burst pipe (covered), they may issue a reservation of rights letter.
Why it matters:
This term affects how claims are handled and what payout a homeowner may receive.