FEATURED | What happens when you are underinsured?
The vast majority of the great British public don’t appreciate that in most household & commercial policies is a policy term called average. Average is in the policy to protect insurers against those clients that either purposefully underinsure their assets to generate a lower premium or who have accidentally underinsured their assets whereby the sum insured at risk is greater than the policy sum insured. So, what’s the point?
The point is this: Insurers want to reinstate the client back to the same pecuniary position they were prior to a loss. If it transpires following a claim that the risk exposure is greater than the policy sum insured, then the insurers will not pay out more than they have to as they've not collected the correct level of premium for the risk or indeed, may have applied security or other terms had they known in advance of the real value or exposure. By applying the average clause means the insurers will reduce the pay-out proportionate to the loss incurred.
If the building sum insured is £300,000 but the true reinstatement cost is £400,000, most insurers will only pay out ¾ of any claim regardless of the claim value.
We at Fenchurch, use a variety of tools and facilities to make sure the client is insured for the correct value at risk, whether that be jewellery & watches, buildings or home contents. Get in touch with a broker you know.
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