What is the definition of Underinsurance?

Underinsurance refers to the fact that the policyholder has insufficient insurance coverage. This will result in the insured person's having to fork in additional money to repair or replace damaged items that are covered in the policy, since the damages cost more than the policies' maximum limits.

Simply put, underinsurance is buying insurance coverage for less than the value of the asset or property or for less medical benefits than what the insured actually needs. This may also mean that the insured has to deal with skimpy benefits, high out-of-pocket expenses, as well as high co-payments and deductibles.

To avoid underinsurance, it is best to buy coverage for the replacement value, rather than for the purchase amount.

• Insolvency
• Misstatement of Age or Sex Provision
• Modified Premium Policies
• Moral Hazard
• Comprehensive Coverage