If you are over insured, what does this imply about your compensation?

When you are over-insured, it means you have purchased insurance coverage that exceeds the actual value of the asset in question. If a loss occurs, the principle of indemnity applies, which states that an individual should not profit from an insurance claim but rather be restored to their original financial position prior to the loss.

Since the compensation is based on the actual value of the loss incurred, you will be compensated only for that value, regardless of the amount of insurance coverage. This prevents any potential for financial gain beyond the loss itself. Thus, while it may seem beneficial to have higher coverage, in reality, when a claim is made, compensation will align with the actual loss rather than the inflated insured amount.