In psychology, compensation is a strategy whereby one covers up, consciously or unconsciously, weaknesses, frustrations, desires, or feelings of inadequacy or incompetence in one life area through the gratification or (drive towards) excellence in another area. Compensation can cover up either real or imagined deficiencies and personal or physical inferiority. Positive compensations may help one to overcome one's difficulties. On the other hand, negative compensations do not, which results in a reinforced feeling of inferiority.

There are two kinds of negative compensation:

Overcompensation, characterized by a superiority goal, leads to striving for power, dominance, self-esteem, and self-devaluation.

Undercompensation, which includes a demand for help, leads to a lack of courage and a fear for life.

A well-known example of failing overcompensation is observed in people going through a midlife-crisis. Approaching midlife, many people lack the energy to maintain their psychological defenses, including their compensatory acts.