YOU ASK:

What is the definition of Insurance-To-Value?

WE ANSWER:

Insurance-To-Value refers to the amount of insurance written compared to the actual value of the property being insured.

When insurance-to-value is less than 100%, that means the property is underinsured. And when insurance-to-value is more than 100%, the property is overinsured.

This is an important underwriting tool, one that is needed for the correct computations of the premiums for the risks that the insurance company assumes. Having incorrect insurance-to-value information may very well undermine the stability of the insurance company, since premium rates are based on faulty information.

Insurance-to-value is also important for home and property owners, since this can help them know that their property is underinsured. Many of these homeowners may be faced with a loss that far exceeds their insurance limits and they may have to shell out more money in order to replace their property in the event of a total loss.

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