Insurance company bad faith claim tactics can create problems for the policyholder who was injured by a third party or uninsured driver or for the policyholder who was at fault for an injury or wrongful death accident.

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When an insurance company fails to pay a fair amount on a legitimate claim, the result can be financial disaster. For instance, if an insurer denies or lowballs a claim that deserves to be settled and the case against a policyholder goes to trial, it may result in a verdict that exceeds the value of the policy -- in which case the policyholder is responsible for the balance.

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Auto insurance in particular is big business, and because liability insurance is required of every car owner by law, it means big profits for the companies that write the policies. The more premiums they take in and the fewer claims they pay out, the greater the profits they generate. 

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In addition to the claim a policyholder presents to an insurance company for property damage and bodily injury suffered in an accident, bad faith is a unique legal claim against the insurer for its actions. Go deeper on bad faith below.