North Carolina Adjuster Practice Exam 2026 - Free Adjuster Practice Questions and Study Guide

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What does it indicate when Bill has bought $175,000 in insurance coverage on his $300,000 home?

Bill is fully covered

Bill has adequate coverage

Bill is underinsured on his home

When Bill has purchased $175,000 in insurance coverage for a home valued at $300,000, it indicates that he is underinsured. This is because the insurance coverage he has is less than the total value of the home. In the event of a total loss, Bill would not receive enough funds from his insurance policy to fully rebuild or replace his home, leaving him at a financial disadvantage.

Insurance policies are often designed to cover the replacement cost or the full market value of the home, so having coverage that falls short of this value suggests a gap in protection. In many case scenarios, it is recommended that homeowners carry enough coverage that equals or closely matches the full value of their property to ensure complete financial protection. Therefore, with just $175,000 in coverage for a property valued at $300,000, Bill's insurance is inadequate to cover his potential loss.

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Bill is overinsured on his home

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