Over-Insurance – What Is Over-Insurance?

Understanding Over-Insurance and Its Impact

Insurance is a financial instrument used to indemnify or compensate the insured in the event of a potential loss. When a loss occurs, insurance ensures that the insured is reinstated to their original financial position, as it was before the incident.

Over-insurance occurs when a person or business has insurance coverage that exceeds the actual value of the insured asset or risk. In simpler terms, it means having more insurance than necessary.
Examples of Over-Insurance
While over-insurance is more common in short-term insurance, it can also occur in long-term insurance (e.g., life or disability cover). Long-term insurers apply scientific underwriting principles to assess the appropriate level of cover and avoid over-insurance.
Why is Over-Insurance a Problem?
How to Prevent Over-Insurance
To ensure that your insurance is adequate but not excessive, take the following steps:
Over-insurance not only leads to wasted money but also creates ethical risks and financial inefficiencies. Responsible insurance management starts with awareness and proactive policy review. Ensure your insurance cover is suitable—not too little, and not too much—for peace of mind and financial security.
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