What does it mean to be over-insured?

Being over-insured refers to the situation where an individual pays for insurance coverage that they do not need, resulting in unnecessary premiums. This can occur when someone holds multiple policies that cover similar risks or when the coverage limits far exceed the actual value of the assets or potential liabilities they need to protect.

In this context, over-insurance becomes a financial burden, as the individual is spending money on premiums that do not provide additional value beyond what is already covered by other policies or that protect against risks that are unlikely to occur. By understanding this concept, individuals can make better financial decisions regarding their insurance needs, ensuring they have adequate coverage without overextending themselves financially.