The extent to which the value of property, possessions, securities, health, or life is protected from potential loss through contractual insurance coverage. Adequacy of coverage may be measured economically, structurally, or attitudinally, depending on the situation.
If policy limits are set high enough, adequacy of coverage isn’t an issue. However, when a person is underinsured, they or their beneficiary don’t have enough coverage to get adequately compensated in the event they lose their life, property, or personal possessions.
When coverage is sufficient, the insured’s premiums to the insurance company should more than cover the cost of insurance, leaving money left over to repair damages; replace broken, missing, or damaged items, and still leave the insurer operating at a profit.