In a country with severe insurance gap, under-insurance is a faceless behemoth. To the uninitiated, a general insurance policy offers protection to your assets such as health, motor vehicles, property etc. against impending losses. The cover is provided against the sum insured declared, at the time of policy issuance, chosen by the insured, which is the maximum liability to be incurred by the insurance company in the event of a total loss.
As insurance is a legal contract, the insured is expected to insure his assets for their full value and pay premium on that. If in the event of a claim it is found that the asset has not been insured for its full value, the amount of loss payable is proportionately reduced. This is called the Condition of Average, or under-insurance as it is popularly known.
