Underinsurance is essentially not having enough insurance to cover a property claim in the event of property theft, loss or damage. In these instances, by under-declaring the value of your property when buying insurance, you may suffer a severe financial loss in the event a claim must be filed. In many cases, these losses could be absolutely devastating.
The amount of the property value that has been under-declared is equal to the amount of risk you will retain. If the value is $200,000 and your policy covers $140,000 – you are liable for the remaining $60,000 out of pocket.
Similarly, if a fire causes damages worth $30,000, your insurer will only pay $21,000 and you will have to cover the rest.
It is extremely important that you properly declare the full value of the property you are insuring. Saving a small amount of money on your insurance premium now can cost you more than you can cover down the road.
Still in doubt? Check out Mike and Jeanette’s underinsurance story here
Don’t let this happen to you. If you are not sure how to properly value and/or insure your property, contact your broker or your insurer for assistance.
(Long Version sample. To see short version sample please click here)
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