Underinsurance

Definition

• A situation that arises when an individual or entity purchases an insurance policy that does not cover the full value of an asset. For example, if a home is worth $200,000 and the homeowner purchases a policy that only covers damages up to $150,000, then the homeowner would be underinsured in the amount of $50,000.

Synonyms
partial insurance, insufficient insurance

Related Terms and Acronyms

• Claims Adjuster — Definition,
  • An individual who ascertains the insurer's liability after an insurance claim has been made.
• First Loss Insurance Policy — Definition,
  • An insurance policy where the policyholder under-insures their assets and will only receive partial coverage in the event of a loss.
• Insurable Interest — Definition,
  • Something of sufficient worth and benefit that an individual or entity would have reason to insure against its lost.
• Insurance Claim — Definition,
  • An application for benefits made by an insurance policyholder after an insured event.
• Loss Settlement Amount — Definition,
  • The percentage of damages an insurer is contractually obligated to pay for after a claim.
• Underinsured Motorist Coverage — Definition,
  • Auto insurance that covers damages when the other driver in a collision is at fault but does not have sufficient insurance coverage.
• Valuation — Definition,
  • The estimation of a property's price value through an appraisal.
  • The process of finding the worth of an asset or business.
• Value Reporting Form — Definition,
  • A form used to keep track of a business's current inventory value.