Underinsurance

Part of speech: noun

Definitions

1. The condition of having insurance protection that is inadequate to cover the full value of an asset or the extent of potential loss
2. A situation in which an insured item or person is protected by a policy with limits lower than what would be needed to replace or repair it fully
3. The state of being covered by insurance at levels below what is necessary to safeguard against complete financial harm from damage or liability

Etymology: Underinsurance is a plain compound: the prefix "under-", meaning insufficient or below what is needed, attached to "insurance". It describes a policy that covers less than the full value of what it protects, so that a loss can leave the policyholder bearing part of the cost. The pattern is productive in English, as with underpayment or underestimate, where the prefix simply marks a shortfall relative to the expected amount. The word's interest lies mostly in its usage. Insurers and regulators apply it to property coverage that falls short of replacement cost, and to health cover that leaves gaps the policyholder must fill. Because the term combines two familiar elements, its meaning follows directly from them, and no sense has shifted away from the parts.