Many insurance policies include an 'Average' or 'Co-Insurance' clause (also known as the 'under-insurance' clause) which means if you insure for less than the full value of the property, a claim can be reduced in proportion to the amount of the under-insurance.
Which clause is applicable in case of under-insurance of stock?
A fire insurance policy has an average clause mentioned in it which takes care of the cases of under-insurance. If insured the assets in the fire insurance policy, for less than their full value, the insured requires to bear a proportion of the loss according to the average clause mentioned in the policy document.
What are insurance clauses?
Clauses are sections of the insurance policy. They define the insurer's responsibilities to the policyholder, circumstances under which claims will and maybe won't be paid out, as well as the policyholder's responsibilities. Sometimes called exclusions, these are designed to help the customer and the company.
What is average clause in insurance?
The Average Clause is a policy term that restricts the total payout based on the proportion of the value covered.