Question

Definition of under-insured with example. (20m)

Answer 1

Underinsured means a person who has purchased an insurance against the damage and loss of property in an amount which is less than the fair value which can be sometimes bought intentionally even with the full knowledge of risk. It is insufficient insurance that will be making policyholder responsible for large part of loss of the insurance and it can also lead to financial hardships.

For example, if an insurance is taken for lower premium in term of health Insurance in which 40% of the loss is borne by the insurance company and 60% of the loss is borne by the individual is a type of underinsurance.