What does "under-insured" mean in life insurance?

In the context of life insurance, "under-insured" refers to a situation where the coverage provided by the policy is inadequate to meet the financial needs of beneficiaries after the insured person's death. This could occur if an individual has not purchased a sufficient amount of life insurance to cover expenses such as mortgage payments, education costs for children, or other financial obligations that would remain after their passing. The importance of appropriate life insurance coverage lies in ensuring that loved ones are financially secure and can maintain their standard of living without the deceased's income.

This definition highlights the significance of evaluating one's life insurance needs carefully. Under-insurance can lead to significant financial hardship for surviving family members who may find themselves responsible for debts and expenses without the necessary financial safety net provided by life insurance.

In contrast, the other options address different aspects of insurance that do not directly relate to the concept of being under-insured. For instance, having a premium that is too high does not affect the adequacy of coverage, and being fully covered means that the policy meets identified financial needs, while not having any insurance at all describes a lack of coverage rather than insufficient coverage.