What Does It Mean to Be Underinsured?

Underinsurance occurs when your insurance policy doesn’t provide enough coverage to meet your financial needs in the event of a claim. In Malaysia, there are two primary reasons for being underinsured:
1. Low Sum Insured
This happens when the sum assured is too low for your actual needs. Many Malaysians opt for lower coverage to save on premiums, but this can lead to financial problems in an emergency.For example, if you purchase a car insurance policy with a sum insured of RM30,000 but the actual market value of your car is RM50,000, you are underinsured. In the event of theft or an accident that results in a total loss, your insurer will only pay up to RM30,000, leaving you to cover the remaining RM20,000 out of pocket.
Another example is home contents insurance. If your electronics are valued at RM50,000, and you only insure them for RM40,000, you are underinsured. If you experience a loss, your insurer will only cover a portion of the damage, leaving you to bear the rest.
2. Insufficient Coverage
In this scenario, your insurance policy may not provide adequate protection for your specific needs. You might assume that you’re fully covered, but your policy may have significant exclusions.For example, you may have travel insurance that covers trip cancellations and lost baggage, but your policy might exclude medical expenses incurred overseas. In the event of sickness or injuries sustained while travelling, which require you to be hospitalised, you will have to pay for the unexpected medical bills at your own expense.
Similarly, not all home insurance policies in Malaysia cover natural disasters like floods or earthquakes. If your home is destroyed in such an event, and your policy doesn’t cover it, you will face significant financial loss.
How to Ensure You Are Adequately Insured in Malaysia

To avoid the pitfalls of underinsurance, here are some essential steps to ensure you have the right coverage in place:
1. Assess Your Insurance Needs Thoroughly
Before purchasing any insurance, it’s crucial to assess your financial situation and future needs carefully. For example, if you are travelling, consider getting travel insurance that covers unexpected events such as trip cancellations, medical emergencies or lost luggage. For home insurance, ensure the coverage reflects the actual value of your property and belongings.2. Understand Your Policy Terms and Conditions
It is important for you to understand your policy details and exclusions. For example, check your motor policy whether it provides essential coverage such as personal accident cover for drivers and protection against natural disasters. Other example is to verify that your home insurance policy covers natural disasters like floods or earthquakes. By understanding the policy terms and conditions, you will be able to plan accordingly, whether to include an add-on cover to ensure you have an adequate coverage for your insurance policy.3. Seek Professional Insurance Advice
Insurance products can be complex, and with so many options available, it can be challenging to know which policy is right for you. If you're unsure about which coverage to choose, consider consulting an Insurance Adviser. A professional can guide you through the insurance landscape and help you make informed decisions about your coverage.4. Factor in Your Premium Payment Capability
When purchasing insurance, ensure that the premiums are within your budget. Don’t opt for coverage that you can’t afford to maintain.Keep Your Insurance Flexible: Adapting Coverage to Your Changing Needs
Properly insuring yourself is about finding a balance—ensuring you're covered for the risks that matter most without paying for unnecessary extras. The key is to assess your unique needs and choose policies that offer adequate protection while keeping your premiums manageable.Whether it’s car, home, motorcycle, or travel insurance, MSIG offers customisable plans that let you pick and choose the protection that best fits your life. With flexible options, you can tailor your coverage to suit your lifestyle and ensure you're properly protected at all times.

Ready to get the coverage you need? Explore MSIG's range of insurance products, get an instant quote and find the perfect protection for your unique needs today.
With MSIG, you can secure your future with confidence.
*The above article is intended for informational purposes only. Loanstreet accepts no responsibility for loss that may arise from reliance on information contained in the articles.