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Defining Underinsurance in Home Insurance and Its Effect While Claiming

The last thing you would want to hear when you claim is that your home insurance policy cannot cover your total loss, or your insurer refuses to pay the full value of your claim. The only reason is that you are underinsured. Let us understand this concept in-depth.

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About Underinsurance in Home Insurance

'Underinsurance in home insurance' refers to when something is insured for less than its current value. Underinsurance is a common issue when it comes to coverage of home content.

Usually, it happens when a person does not know the actual value of any home content and the structure value and settles for whatever is offered while buying home insurance. This could lead to insufficient coverage at the time of claiming the policy.

Having said that, here are some essential pointers related to the concept of 'underinsurance' and its impact on the home insurance claiming process.

Characteristics of Underinsurance in Home Insurance Policy

The concept of underinsurance comes with the following features:

  • Underinsurance means the policyholder does not have sufficient coverage for the loss or damage, which may lead to financial hardship.
  • If the policyholder is underinsured and the property is damaged in any way, the insurance payout may not be enough to cover the replacements or repair costs.
  • Comparing several property insurance quotes at may save you some money as the rates for homeowner’s insurance are rising.

You may also read Is it Mandatory to Buy a Home Insurance Policy for Your Home Loan?

How to Avoid Home Underinsurance?

Now that you can comprehend the meaning of being underinsured in terms of home insurance, it is imperative to know how to avoid it. Here you go:

  • The primary action would be checking the policy's clauses, especially the exclusions. Damages from earthquakes and floods are usually not included. However, multiple policies offer coverage of the loss/damage caused by earthquakes and floods by top home insurance companies of India.
  • If you wish to stay under your current insurer, ask for a quote with a higher deductible that maintains decent coverage. A higher deductible should mean lower premiums and may be worth it if the reduction is significant.

Common Reasons for Home Insurance Claim Rejection

India is the second-most underinsured country in the world. Underinsurance is a serious issue because it mirrors that the insurance holders must pay the financial costs of any large claims out of their own pocket.

Here are the grounds where you can be considered underinsured, or the insurer may deny your claim request:

  1. Underinsured Contents: Not expensive or portable contents can also be underinsured. It happens when you only insure the expensive contents as you think you would have it with you anytime.

    For example, Say you use a desktop system, which includes a monitor screen, CPU, keyboard and mouse. Now you get the most expensive part of that desktop insured, which is a CPU and Screen. Then, you will not get an insurance cover for the keyboard and mouse and the wires used to connect each other. That is where you'll be underinsured as you have not declared the combined cost of the whole set of your desktop but of the most expensive part, like the CPU and Screen.

  2. Underinsured Renovating Cost: Similarly, when you only insure your building's market price and not the re-build cost, then you'll lose the insurance amount you have put in while re-building it or renovating it.
  3. Irrelevant Information Shared by Agent: Most of the time, when you buy home insurance offline, your insurance agent tries to sell the products that can ensure them a hefty commission. Hence, they do not prioritize your profit. This may result in underinsurance.
  4. Wrong Plan: There are plenty of insurance policies available; however, only some plans are designed to meet your needs. If you buy the wrong plan, you will end up with an inadequate cover.

Summing it up!

Most of the people in India who have home insurance are underinsured. The reason is they do not know the actual value of their property or somehow can't find out how much insurance they require. The principle of underinsurance comes into play when you have to bear a portion of the total loss, as the insurer is not liable to cover it. Hence, it is vital to be careful while buying a home insurance policy to avoid underinsurance. With multiple options available at, you can compare and find the best deal at an affordable price and avoid being underinsured.

Written By: PolicyBazaar - Updated: 03 November 2023
Disclaimer: Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by an insurer.
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Reviews & Ratings

4.4 / 5 (Based on 120 Reviews)
(Showing Newest 10 reviews)
Bokaro, July 26, 2022
Coverage for natural calamity
I was looking for an insurance policy that provides me coverage for natural calamity. Since my house is located near a river and it floods my area in the rainy season. So i went on the Policybazaar website and particularly look for this coverage found the exact plan that provides this coverage.
Bilaspur, July 26, 2022
Premium Calculation
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Bikaner, July 26, 2022
Natural Calamity cover
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Amritsar, July 26, 2022
Enough coverage
I was looking for a home insurance plan online. I was fed up as i have to visit different websites to look for a single suitable insurance plan. However, i stumbbled upon Policybazaar website where i was able to find the right insurance plan that could provide me enough coverage.
Bareilly, July 26, 2022
Nice customer service
I wanted to purchase a home insurance policy and a friend of mine suggested to purchase it from Policybazaar. I bought the policy and after that i had a confusion regarding exclusions so i called up Policybazaar customer care and they cleared out the confusion and i loved their customer service.
Ajmer, July 26, 2022
Qiuck claim
I purchased a home insurance policy recently. However, due to a natural calamity, my house was damaged as the pressure of the water because of flood broke the enterance door of my house. But the insurance plan that i bought got me covered and i as able to get the quickest claim possible.
Delhi, July 26, 2022
Natural calamities covered
I bought a home insurance policy recently. As i live near a river and in the rainy season, my area gets flooded so in order to protect my house and its contents, i purchased the insurance to get coverage for such natual calamities and i am tension free now.
Kolkata, July 26, 2022
Wide coverage
The home insurance plan that i purchased from policybazaar's website is a great plan that provides me coverage for not only the structure but also cover several expensive content of the home such as paintings, mobile phones, laptops, television, etc.
Ahmedabad, July 26, 2022
Suitable insurance plan
I purchased the group health insurance policy from Policybazaar website. First of all, i did not have to wander much online while lookig for a home insurance plan that fits my requirement and i found the suitbale home insurance plan by comparing different plans on the website.
Amritsar, June 09, 2022
Natural calamities covered
I bought a home insurance policy recently. As i live near a river and in the rainy season, my area gets flooded so in order to protect my house and its contents, i purchased the insurance to get coverage for such natual calamities and i am tension-free now.
  • Disclaimers+

    #Savings of 28% are based on the comparison between the highest and lowest premiums for a pucca building with sum insured of >₹ 1 crore at Delhi, for property age less than 5 years and policy term of 11 years.