what happens when you re underinsured
you can be underinsured if your policy has gaps or exclusions that leave you without coverage or it could be that your claim exceeds the maximum amount that the insurance policy can pay out a lower benefits policy may seem attractive because you pay lower monthly insurance premiums but if the policy leaves you underinsured then the loss arising from a claim may far exceed any marginal savings in insurance premiums underinsurance can cause a serious financial crisis depending on the asset that is insured and the extent of the shortfall in insurance inflation extreme weather events and an increase in people s risk consciousness due to the covid 19 pandemic will trigger above average insurance premium growth in 2022 according to global insurance provider swiss re group 1underinsurance and residential insuranceinsurance costs for home and rental properties are on the upswing from 2017 to 2021 premiums reportedly rose an average of 12 2 nationwide lots of natural catastrophes coupled with more people moving into disaster prone regions and rising home repair and rebuilding costs are considered the main drivers of this rise in insurance costs 2the average annual homeowners insurance premium in 20213underinsurance for your home can cause a serious financial crisis depending on the amount of damage and the extent of the shortfall in insurance take for example a house and its contents that are insured against all risks for 250 000 with a deductible of 20 000 the house is subsequently destroyed in a fire and the cost to replace the residence and its contents comes to 350 000 that will require the homeowners to make up the difference of 100 000 plus the 20 000 deductible from their own resources if you can t purchase a policy because you live in a high risk area consider buying one through a fair access to insurance requirements fair program available in many states 4underinsurance and health insurancethe percentage of u s adults with no health insurance decreased from 20 in 2010 to an estimated 13 in 2020 thanks mainly to the affordable care act aca or obamacare however the percentage of adults who are underinsured increased from 16 in 2010 to 21 in 2020 5