If a home is insured for less than 80% of its value, what is this condition called?

The condition in which a home is insured for less than 80% of its value is known as being underinsured. This term indicates that the amount of insurance coverage falls below a recommended threshold to adequately protect the asset against loss. In many cases, insurance policies are designed to ensure that property owners carry at least 80% of the replacement cost to provide sufficient coverage for most potential damage or loss scenarios.

Being underinsured can lead to significant financial risks; if a loss occurs, the homeowner may not receive enough compensation to fully repair or replace their property. This is especially pertinent in claims situations, where the insurance payouts might not cover the full cost of damage, leaving the insured to bear the financial burden of the uncovered value.

The other terms do not correctly characterize the situation where a home is insured for less than 80% of its value. Overinsured would imply that the insurance coverage exceeds what is necessary or prudent for the property's value. Fully insured would indicate that the property is insured for its full value or at least meets the recommended thresholds, while partially covered may suggest a different level of inadequate coverage without specifying the percentage.