What's up with underinsurance?

A property can be underinsured due to:Home and business owners whose property is severely damaged or totally destroyed often find themselves far short of the insurance dollars they need to replace what they lost. Underinsured is the word that describes this situation.

A property can be underinsured due to:

  • Insurance limits that are too low
  • Gaps due to policy exclusions
  • High deductibles

When you’re underinsured there is a gap between the actual cost of replacing your destroyed home or business and the payout you receive from your insurer. Underinsurance causes claim settlements to be delayed or derailed into litigation. Underinsurance is one of most challenging obstacles to loss recovery.

What is UP doing so solve this problem?

UP is working hard every day to help solve the underinsurance problem.  United Policyholders first saw the underinsurance problem after a 1991 wildfire in Northern California.  We've seen it after every disaster since that time. Underinsurance has reared its ugly head in Arizona, California, Colorado, Kansas, New Mexico and Texas after wildfires and in every one of the Gulf Coast states that have been hit by hurricanes in recent years.  UP is fighting for underinsured consumers in courts and legislatures.  We're educating consumers to get second opinions on dwelling replacement values when insuring their homes and offering strategies to underinsured loss victims.

Underinsurance most often affects disaster victims, but it also affects people who lose structures in isolated incidents and it's economically devastating to people and communities, and patently unfair:

Insurers paint a rosy picture in ads that tout their expertise and honor: "We'll put you back where you belong" They label their products "Deluxe Home Replacement Policy."  At the point of sale, they invite trust.  They ask a few questions about the property.  They run some numbers.  They issue the policy and cash the premium checks.  But when policyholders come up short, suddenly its not their problem.  And the laws in every state allow them to pass the buck and say "hey, it's your property, your problem."

With regard to responsibility for setting adequate insurance limits, LAW DOES NOT REFLECT REALITY.  Reality is, insurers do the math and set policy limits.  Reality is insurers know what it costs to repair and rebuild homes - that's the business they're in.  Our laws need to change, and UP is working toward that goal.

The following links will lead you to resources to help you avoid being underinsured in the first place or solve the problem if you suffer a loss and find yourself underinsured.

Pre-loss Buying Tips

Post-loss Claim Tips

Laws and Lawsuit Information

Underinsurance generally involves legal issues:

Statistics on Underinsurance