Author: David Dale

Insurance protects what you’ve worked hard to build—but simply having a policy doesn’t guarantee full protection. Many homeowners and business owners face a costly issue called underinsurance, where coverage limits fall short of the actual cost of a loss.

Too often, people only discover this gap after filing a claim—when options become limited and expenses rise quickly.

What Is Underinsurance?

Underinsurance occurs when coverage limits don’t fully cover the cost to repair, rebuild, or defend against a loss. This can affect personal policies, commercial policies, and even specialty coverage.

Common examples include:

• A home insured for less than today’s rebuilding costs

• Auto liability limits that don’t reflect current lawsuit trends

• Business coverage that hasn’t kept up with growth

• Missing endorsements that create unexpected gaps

When losses exceed policy limits, the policyholder pays the difference out of pocket.

Why Underinsurance Happens So Often

Most people don’t intentionally underinsure. Coverage often falls behind because of:

• Rising construction and labor costs

• Renovations or upgrades that never get reported

• Business expansion, new equipment, or higher revenue

• Choosing lower limits to reduce premiums

• Policies that haven’t been reviewed in years

Over time, these changes increase risk—even when coverage appears “adequate” on paper.

The Real Cost of Being Underinsured

Underinsurance can place significant financial pressure on families and businesses. Out-of-pocket costs may include:

• Repair or rebuilding expenses beyond policy limits

• Legal judgments that exceed liability coverage

• Lost income from business interruption

• Delays that slow recovery and long-term stability

In severe cases, underinsurance can force difficult financial decisions or jeopardize everything you’ve built.

What Happens When You File a Claim

Insurance policies pay claims up to the limits you select—not the total cost of the loss. Even valid claims can leave gaps when limits fall short.

For businesses, this can disrupt operations, strain cash flow, and impact employees and customers. For families, it can drain savings and threaten future financial security.

How to Avoid Being Underinsured

You can reduce underinsurance risk by taking a proactive approach:

• Review policies annually or after major life or business changes

• Update coverage following renovations, purchases, or growth

• Reassess liability limits based on today’s legal environment

• Confirm replacement cost values reflect current pricing

• Consider umbrella or additional coverage where appropriate

Working with an insurance professional helps uncover gaps before a loss occurs.

Why Proper Insurance Planning Matters

Insurance should do more than meet minimum requirements—it should protect your financial future. The right coverage provides stability, confidence, and peace of mind when the unexpected happens.

At Combined Insurance Service LLC, we help clients understand their risks and adjust coverage as life and business evolve—not just at renewal time.

Are You Confident in Your Coverage?

If you haven’t reviewed your policies recently—or if your situation has changed—you may face underinsurance without realizing it. A coverage review can help ensure your protection matches your current needs.

Protecting what you’ve built starts with having the right coverage in place.