Under normal circumstances, if your insurer is trying to settle an insurance claim for significantly less than the cost of the repair or replacement, we’ll make sure you get what you’re due. We have encountered cases, however, when we’ve had no choice but to tell the policyholders that we can’t help them. And that’s due to the Average Clause in their policy.

In two cases, for instance, our clients lost £50,000 and £135,000 respectively. The problem was that, in both cases, the insurer’s Loss Adjuster was completely within their rights to withhold this money.

This is because, when the clients had renewed the policies on their homes, they’d ignored the need to update the “insurance value”, which is the actual current value of the property. As we all know, the value of property is constantly rising, and if you don’t update the amount at each renewal, your home will be seriously underinsured.

This means that you won’t have paid enough in premiums to cover the full cost of the claim you’re making. Not unreasonably, insurers aren’t willing to pay out in full for an underinsured property.

The Condition of Average

The Condition of Average is inserted into insurance policies to protect insurers from this situation. Put most simply, it says that, for instance, if you’ve only declared 50% of the insurance value, you’ve only paid 50% of the premiums and the Loss Adjuster will thus only allow 50% of your claim.

However, this doesn’t just mean you can make any insurance claim up to 50% of the property’s value. If your home is worth £400,000, for example, but it’s only insured for £200,000, you’ll only receive 50% of whatever you’re claiming.

In this situation, if you were claiming £50,000, with an excess of £250, the calculation would be:

• 50% Average of a £50,000 claim = £25,000
• Less policy excess of £250 = £24,750 pay-out
• Total loss on £50,000 claim = £25,250

A loss of this size could be devastating, so if you’re unsure whether your property’s value is up to date in your policy, consult your insurance broker as soon as possible. Because Allied Claims can help get your full pay-out — but only if you’re smarter than the Average Clause.