Sheila and Dominic Traina of Staten Island, N.Y., were offered only $10,000 for damage Sandy inflicted on the home they've lived in for 43 years, the Chicago Tribune reported.
Allstate used an image of their ravaged home in an ad about how the company takes care of policyholders.
Allstate spokeswoman Laura Strykowski told the Tribune the company is continuing to reach out to the Trainas to discuss their concerns and is committed to resolving the matter in accordance with their policy.
At issue is whether the damage was caused by wind or water.
Traditional homeowner policies written by Allstate don't cover losses from flooding.
Neighbors told the Trainas that wind gusts tore off their roof and toppled walls before the area was flooded.
The Illinois-based insurance company has paid out almost $1.1 billion in Sandy-related claims.