One of the most difficult concepts, for an insured person to fully grasp, is the average clause in an insurance policy. Every time we encounter this problem, in settling claims for Clients, we get the same traumatic response “I pay my premium so I should be fully covered”.

The essence of the average clause is that the sum insured on a property should include for all the elements of reinstatement:  Demolition and Removal of Debris, Rebuilding the Property, Professional Fees and finally VAT. The combination of these elements makes up the total sum to be insured. The Loss Adjuster, appointed by the Insurance Company, will fully check these elements and, in the event of a shortfall on the amount actually insured, they will apply a pro rata reduction on the amount claimed. This can have a devastating affect on a claim, particularly where there is only partial damage to the dwelling, and it is therefore very important to seek advice when arriving at the sums to be insured on your property.

We often explain it simply to Clients by stating “if the value at risk is more that you are insured for then you are insuring the difference yourself”