- A circumstance where the level of insurance coverage is not enough to cover the cost of potential damages or losses
- A specific type of insurance policy that provides protection to the policyholder by covering the balance of the expenses when the liable party's insurance policy falls short of covering the damages incurred
- Because her home valuation increased significantly over the years, she found herself facing an underinsurance situation when trying to claim after a fire.
- The car accident resulted in high medical bills and the at-fault driver's policy wasn't enough to meet the costs, luckily, she had underinsurance which helped cover the rest.
- To protect oneself from financial strain in case of an accident, it is wise to consider underinsurance as it covers when the responsible party's insurance is insufficient.