Florida Insurance Licensing 2025 – 400 Free Practice Questions to Pass the Exam

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What is "underinsurance"?

The risk of having too much coverage

The situation of having insufficient coverage for potential losses

Underinsurance refers to the situation where an individual or entity does not have enough insurance coverage to adequately protect against potential losses. This can occur if the value of the insured property has increased, or if the coverage limits set in the policy do not match the actual financial exposure the insured could face in the event of a loss.

For example, if a homeowner has a policy limit of $200,000 but their home is worth $300,000, they are underinsured. In the event of a total loss, they would only receive $200,000 from the insurer, leaving them financially vulnerable due to the shortfall. Therefore, recognizing underinsurance is critical for ensuring that adequate coverage is in place to address both current valuations and the risks that one might encounter. This concept emphasizes the importance of regularly reviewing and updating insurance policies to match evolving needs and values.

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The practice of excluding certain perils from coverage

A policy feature that reduces premium expenses

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