Panamá underinsurance.


It is common practice for policyholders to acquire insurance policies, without going into details of their content, limits and responsibilities so that they have value in the event of accidents.

One of the critical concepts that needs to be understood in the insurance sector is underinsurance; as well as the measures on how to avoid it in your policy.

In this article, we break down this term, the proportional rule that accompanies it, and the importance of keeping the value of the insured property up to date.

What is Underinsurance?

Underinsurance occurs when the insured value of your property is less than its real value. In this case, you become your own insurer for the difference between these two values, which can generate a considerable financial disadvantage if a loss occurs. The insurer will apply the proportional rule, which means that you will share the costs of any loss with them and therefore the policy will not cover your entire claim.

Proportional rule and its impact

The proportional rule is a formula that insurers use to determine the amount they will compensate. This formula consists of multiplying the insured sum by the value of the damage and dividing it by the actual value of the insured property. This result is the sum that the insurer will pay you.

How is underinsurance applied in legislation?

In Panamá, underinsurance is governed by article 1009 of the Commercial Code. This article establishes that the insurance will only cover the actual value of the insured property If the insured value is higher, the insurer will only be liable up to the actual value, regardless of what has been agreed in the policy

How LAC Legal can help you avoid underinsurance

It is essential to keep the value of your insured assets updated to avoid underinsurance. This way you ensure adequate coverage in the event of accidents and prevent the proportional rule from reducing your compensation. Our clients at LAC LEGAL have the advice of our insurance law specialists to offer you efficient and personalized solutions; we provide our knowledge and skills to protect your interests and ensure that you always have the appropriate coverage.

For example, if you have insured your house for $200,000, but its real value is $300,000 and an accident occurs that generates damages of $100,000, the insurer will only cover two-thirds of the loss ($66,666.67), applying the proportional rule, leaving you to cover the remaining third.

In short, underinsurance can lead to unfavorable financial consequences if a loss occurs. If you would like more information about underinsurance, we invite you to explore other resources on our website or contact our team of insurance experts directly. At LAC LEGAL, we are proud to be your trusted partner for all your insurance-related legal needs.

Avoid the risks of underinsurance with LAC Legal

Avoiding underinsurance is essential to keep your assets properly protected. Don’t let an incorrect evaluation of your assets lead you to an accident with insufficient coverage. At LAC LEGAL, our team of insurance specialists is ready to offer you the personalized advice you need.

For more information on legal advice, do not hesitate to contact us at or our central line +507 395 5607.

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