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Average Clause

What is the Average Clause?

In order to fully benefit from property insurance, it is important that the sum insured is equal to the replacement value of the property that you are insuring.

If you don’t insure for the replacement value of the house, the Average Clause will apply. What is the Average Clause? The simple explanation is, if at the time of the loss, the property is insured for less than the replacement value, then the insured is considered “self insured” for the difference and the claim will be paid proportionately.

For example, if the replacement value of your house is $10,000,000 and you insure it for $5,000,000 you will be underinsuring the house 50%. In the event of a partial loss, of say J$1,000,000, you will only recover J$500,000 [less any applicable deductible], or 50% of your loss.

Note that you would receive from your insurer the same percentage for your loss as your sum insured bears to the building’s replacement value.

Click to read more about the Average Clause which applies to the following policies:

• Boiler & Pressure Vessels
• Burglary
• Commercial Fire
• Commercial All Risks
• Consequential Loss
• Contractors’ All Risks
• Contractors’ Plant and Equipment
• Electronic Equipment All Risks
• Goods-in-Transit
• Home “Cover All”
• Machinery Breakdown