GlossaryEN1 min readUpdated: Jun 26, 2026

underinsurance

Underinsurance occurs when the sum insured falls below the actual value of the goods at the time of loss.

Quick Answer

Last updated: 26 June 2026Published: 27 January 2026

Source: https://www.investopedia.com/terms/u/underinsurance.asp

Category

Logistics Concept

Reading time

1 min

Words

120

Mentioned in

–

Definition & Explanation

Underinsurance occurs when the sum insured falls below the actual value of the goods at the time of loss. Insurers worldwide apply the proportional rule as a consequence: the claim payout is reduced in the same ratio as the insured sum is to the true value, and this reduction applies equally to partial losses. Common causes include inaccurate value declarations, omitted ancillary costs such as freight charges and duties, and goods appreciation between policy inception and the loss event. For freight forwarders, advising shippers to keep declared values current and complete is a core professional responsibility. Underinsurance is distinct from overinsurance, where the insured sum exceeds the actual value – in that case, the true value simply caps the payout.

Next steps

Tools that match this term

Calculate customs valueWork out import duties and customs valueOpen Check transport insuranceEstimate coverage and premiumOpen Find HS codeDetermine the tariff number for customsOpen Compare IncotermsClarify duties, cost and riskOpen

Related Terms

Logistics knowledge straight to your inbox

Weekly: Top news, industry facts and insights from the world of logistics – free.

underinsurance

Next steps

Related Terms

Logistics knowledge straight to your inbox

Community Questions & Answers