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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Vincent Hanley
Vincent Hanley
13:59 22 Sep 22
I would be happy to recommend Trevor Kelly (Insurance Claim Solutions) in the event you need to make a claim on your household insurance. We recently had a serious leak in our hot water pipes and Trevor’s prompt attention was the essence of professionalism. It also took the hassle and stress out of dealing with the Insurance Company’s loss adjuster and with the pursuit of our claim. Couldn’t recommend him highly enough and would be very comfortable recommending him to family and friends.
Roger Kear
Roger Kear
10:59 04 Sep 22
The level of service that I received from Trevor Kelly was second to none. This was my first major claim with an Insurer and unsure of the process. Trevor took away all that worry. He was polite, reassuring, punctual and efficient. He dealt will all the details of the claim and completely took away all the hassle. If ever there was a service that I would recommend then it has to be Trevor Kelly. If anyone has the misfortune to make an insurance claim then the first call they should make should be to Trevor Kelly.
Eimear McBride
Eimear McBride
13:13 22 Aug 22
I would highly recommend Trevor's services. He guided me through the process from beginning to end, along with providing helpful advice along the way. He was responsive, efficient, practical and empathetic throughout.
Sherin Mathew
Sherin Mathew
16:42 18 Aug 22
Excellent service.....We went through a tough time and Trevor was there to support us... Proffessional and approachable.... Highly recommending.......
sheila hayes
sheila hayes
09:16 04 Aug 22
I used Trevor's company after I had a leak under my floor, he came recommended to me from leak detectors and the same day as I made the call Craig came out to inspect the damage and he handled everything from there on. I was very anxious as my insurance company had told me they would not cover the damage as I was causing it myself by having to dig up the floor to find the leak but Craig assured me it would be sorted. I am extremely happy with the settlement and the service from Insurance Claim Solutions. I would urge anyone in this position to contact them they take all the worries away.
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