Under-Insurance: What it is and why it's important to avoid
Insurance is essential to protect yourself from financial losses that can occur due to unforeseen circumstances. Whether it’s your home, car, or health, having insurance can save you from paying a large sum of money in case of any unfortunate event. But, simply having insurance is not enough. It’s important to ensure that you have adequate coverage that can protect you from any significant financial loss. Under-insurance is a situation when you have insurance, but it’s not enough to cover the full cost of the damage or loss.
Under-insurance is a common phenomenon and can happen due to various reasons such as lack of knowledge about the right insurance coverage, cost-cutting measures, or simply neglecting to update the coverage amount over time. It can have significant financial implications and can result in a situation where you end up paying a considerable amount of money out of your pocket.
For example, imagine you have car insurance with a coverage limit of €15,000, but you get into an accident where the cost of repairs is €20,000. In such cases, you will be responsible for paying the additional €5,000 from your pocket, as your insurance coverage is not sufficient to cover the full cost of the damage.
Similarly, if you have homeowner’s insurance, but the coverage amount is not enough to rebuild your home in case of a total loss, then you may end up paying a considerable amount of money to cover the difference.
Under-insurance can have severe consequences in the long run, not only financially but also with regards to mental health. In case of a significant loss, the added financial burden can lead to stress, anxiety and cause a severe impact on your mental health.
So, what should you do to avoid under-insurance?
The first step is to review your insurance policies periodically and make sure that the coverage amount is enough to cover any foreseeable damage or loss. You can also seek the help of an insurance professional, who can guide you in understanding the different insurance coverage options and recommend the best policies based on your needs.
In conclusion, under-insurance is a significant risk that one must avoid. Adequate insurance coverage can give you peace of mind and protect you from significant financial losses. So, make sure you review your insurance policies periodically and ensure that you have the right coverage amount to protect yourself from any unforeseen circumstances.
As Certified Insurance Advisors, we can create a financial plan for you that will help you strengthen your finances. A plan, that will help you better and more securely provide for your future.
We are at your disposal to provide you with all the information you need to achieve this!
Contact today Mr. Charalambos Agathaggelou, one of the top Certified Insurance Advisors in Paphos, and find out everything you need to know.