What is the average clause and why does it affect my insurance claim?
If your home is insured for less than the full cost of rebuilding it, in the event that you make an insurance claim under your policy the average clause in your policy may result in you receiving less than full value of your insurance claim. If your insurance policy has an average clause this may allow insurers to reduce their liability for the damage in proportion to the amount of under insurance.
Your loss assessor will seek to minimise the effect of the underinsurance in his approach to negotiations with the insurance company.
If your house is insured for 75% of its rebuilding cost insurers will pay 75% of the agreed cost of the damage if average applies.
For example if storm damage costs €10,000 to repair and your house is insured for €150,000 but the full rebuild cost is €200,000 the following will apply €150,000/€200000 by €10,000 = €7,500.
A policy excess or other condition may also apply to the settlement. The above example shows how costly it can be to skimp on the insurance premium but remember that the same principal will apply if €100,000 damage is done.
If your house is fully insured average will not apply and you will get the full value of your insurance claim subject to the terms and conditions of your policy.