Underinsured
Having insurance coverage with limits insufficient to cover the full value of potential losses.
Detailed Explanation
Many homeowners are underinsured, particularly for dwelling coverage, due to failure to update coverage as home values and rebuilding costs increase. Underinsurance can result in significant out-of-pocket costs after a major loss.
Practical Example
After a total loss fire, Thomas discovered his $200,000 dwelling coverage was $80,000 short of the actual rebuilding cost, leaving him underinsured and responsible for the difference to fully rebuild his home.
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