Dangers of Under Insurance - Picture of Insurance Policy wordingUnder Insurance | In a nutshell, you need to an insurance policy review carried out periodically to avoid under insurance.

Under insurance is a situation when the sum insured of the insurance policy is less than the re-instatement value of your property. While under insurance may result in lower premiums paid by the policy holder, the loss arising from a claim may far exceed any marginal savings in insurance premiums.

Don’t gamble with your insurance cover. Ensure that you are fully protected by getting an independent policy review to establish correct levels of insurance.

We deal with cases on a daily basis where the home owner or business owners are under insured and following a loss, they only get a fraction of  their claim, due to “the average clause”.


Under Insurance and the Average Clause

The majority of property policies include a section, which allows the Insurance Company to deduct a percentage of the claim settlement in application of average. How does the Average Clause work in practice?

 The following is an example of how you can be penalized by the Average Clause

  • When taking out a household insurance policy, you tell the insurer the value of the buildings or contents you want to insure e.g. €200,000
  • The actual Value at Risk (House re-instatement value) as outlined by the Society of Charted Surveyors is €300,000
  • House Sum Insured as per policy is €200,000 (your policy could have been taken out a few years ago and the Sum Insurance was never re-adjusted)
  • A fire occurs and the loss of €120,000 is agreed with insurers
  • Because the actual Value at Risk €300,000 and your insurance is only €200,000, this means that your insurance covers only 66.67% of your house. 33.33% value of your property is regarded as Self Insured.
  • Although your total claim is for €120,000, your insurance company will only pay you out up to €80,000. You will have to cover the remaining €40,000, because your property was under insured.

The average clause also applies to the house contents, so if you made any significant purchases or re-decorated your house, you should also adjust the Sum Insured in your house contents section.

In order to avoid this scenario it is prudent to get a policy review carried out. A policy review or pre-loss survey would recommend a sufficient level of cover for both the buildings and contents cover for insurance purposes.

To find out more or to book an insurance policy review – click here.

Contact Details

Insurance Claim Solutions
Golf Rd, Rush, Co. Dublin

Mobile: 086 357 1713
Phone : 01 870 9210

We are registered as Public Loss Assessors and fully regulated by the Central Bank of Ireland

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Hilary Jordan
Hilary Jordan
17:38 16 May 22
From my first phone conversation with Trevor I felt very confident that I had chosen the right person to help us negotiate through the minefield that is making a claim through your home insurer. Trevor's colleague Craig visited our home and was very sympathetic to our situation after a burst mains pipe. He explained everything he was doing and then dealt with the loss adjustor from our insurance company reducing our stress. We were kept informed during the entire process and even though we were dealt a bit of a curve ball, Trevor negotiated the best result for us and we can't reccomend ICS enough. It was the best decision we could make. As an add-on we would urge anybody reading this review to look at and review your home insurance and protect yourself against underinsurance. Thank you Trevor & Craig
Helen Halpin
Helen Halpin
22:44 08 Feb 22
I can’t recommend Trevor highly enough. After a house fire in Jan 2022, we had no idea what to do next. Thankfully, Trevor was recommended to us, and despite it being a bank holiday, he called to the house and provided all the reassurance we needed at a difficult time. Trevor is exceptionally professional, took care of all the paperwork, navigated through the tricky process with the Insurance company and kept us updated every step of the way. 5* service.
Jo Crawley
Jo Crawley
12:08 08 Dec 21
Great service from Insurance Claim Solutions would highly recommend. Thanks again
Oliver Mitchell
Oliver Mitchell
10:09 02 Dec 21
Trevor came in after we'd already started the claim and realised it was a much bigger issue than we'd originally thought. He stepped in seamlessly and quickly and took over everything, which made our lives far easier. He kept open communication every step of the way and ensured that the whole process went smoothly for us. Would absolutely recommend Insurance claim solutions to anyone.
Eibhlin Ni Ghabhlain
Eibhlin Ni Ghabhlain
10:37 26 Nov 21
It was such a relief to hand over all details of the insurance claim to Trevor when I had a recent mains leak in my house. He more than lived up to the recommendations I had received about his work, efficient, professional, inspiring confidence that all was being dealt with correctly. Within a remarkably short time he had dealt with all details of claim and I’m very happy with what he achieved for me in terms of a settlement. Can highly recommend him!
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