How Does Underinsurance Affect Your Claims?
Fecha: 2025-05-27
You've paid for your insurance. You have coverage. And yet, when a claim arises, you’re faced with a payout far below what you expected. The reason? Often, it’s underinsurance.
Underinsurance is more common than you think — and it can seriously affect your ability to claim from your insurer. In this article, we explain what it is, how it affects you, what the consequences are, and how to avoid or fight it.
What Is Underinsurance?
Underinsurance happens when the insured value in your policy (e.g., your home, business, or contents) is lower than the real value of those assets. In other words, you insured for less than they’re worth.
Example:
Your home is worth €150,000
You only insured it for €100,000
That means you're underinsured by 33%
How Does Underinsurance Work in a Claim?
When you make a claim, the insurer applies what’s known as the proportional rule.
If you’re underinsured, your compensation is reduced by the same percentage.
Following the example:
A fire causes €30,000 in damages
Since you're underinsured by 33%, the insurer only pays €20,000
What Types of Insurance Are Affected?
Underinsurance can affect almost any policy with an insured capital, such as:
Home insurance (building and contents)
Business insurance
Classic or high-end car insurance
Warehouse or goods insurance
Machinery or industrial equipment insurance
Consequences of Underinsurance
Reduced compensationYou won’t receive enough to repair or replace what was lost.
Higher personal costYou’ll have to pay the difference out of pocket — often thousands of euros.
Disputes with your insurerClaims may be delayed or partially denied if values were incorrectly declared.
Business interruptionIf you run a business or work from home, underinsurance can prevent you from getting back to work.
Why Does It Happen?
Most people are underinsured without even knowing it. Common causes include:
Incorrect values when taking out the policyMany underestimate the true value of their property or contents.
Unreported upgradesRenovations or improvements that weren’t updated in the policy.
Choosing the cheapest optionA lower premium often means lower insured value — and less coverage.
“Cheap” can end up being very expensive when it comes to insurance.
How to Avoid Underinsurance
Review the real value of your assetsMake a current inventory of furniture, appliances, personal items, stock, etc.
Accurately calculate building valueFor homes or premises, base the value on reconstruction cost, not market price.
Update your policy after any major workAny significant improvement should be reflected in the insured value.
Consult a professionalA broker or insurance advisor can help you get the right coverage.
What If You’ve Already Had a Claim With Underinsurance?
Request the loss adjuster’s reportCheck whether the values were assessed fairly and the proportional rule applied correctly.
Submit a written complaintYou can challenge the insurer’s decision by explaining that:
You weren’t informed about underinsurance risks
You had no intent to mislead
The incorrect value was due to lack of information
- Get expert helpAt MataSeguros, we review your case and negotiate with the insurer to get you the maximum payout possible.
FAQ About Underinsurance
What if I’m only slightly underinsured?Even a 10–15% difference can reduce your payout. There’s no minimum threshold.
Can underinsurance void my policy?No. Unless there was fraud or bad faith, the contract remains valid — but your payout is reduced.
Will my premium go up if I raise the insured value?Yes, but usually only proportionally. It’s better to pay slightly more than lose thousands later.
Conclusion
Underinsurance is a hidden danger in the world of insurance. It may seem like a small detail — until it’s time to file a claim.
Know the risks, insure correctly, and seek professional help if needed.
At MataSeguros, we’re here to protect your rights — even in underinsurance cases.
📩 Contact us today. We only get paid if you do.