THE IMPORTANCE OF VALUATING YOUR ITEMS AND PROPERTY CORRECTLY – THE AVERAGE CLAUSE

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The first step when putting together your new insurance policy, whether it’s for you home, vehicle or business, is to gather a list of all the important items your want to insure and assign a value to each.

This value is the value of replacing the item – i.e., it’s current replacement value. During this process one can be tempted to leave out certain items or assign lower values in the hopes that this might reduce your monthly insurance premium.

The bad news is that while this might save you a few bucks in the short term, it could really harm you in the long term.

What is the average clause and what does it mean?

The average clause is a clause in an insurance policy that states that, should you insure your items for less that the full replacement value, you would be responsible for a portion of the loss. This portion would usually be represented as a percentage of the amount that you were under insured for.

What this means for you is that your insurer would only pay out a percentage of your claim and you would be responsible for the balance.

Why is there an Average Clause?

In a nutshell, of you are only covered for half the value of your assets then you are only entitled to half the value of the claim.

So how do I prevent being under insured?

  1. Assign accurate and realistic replacements values that are CURRENT.
  2. Take into account inflation how this will effect the value of your item.
  3. Reevaluate the value of your assets regularly. If you bought a computer 2 years ago, the replacement value now would be a lot greater than what it was then.
  4. Don’t forget to update your policy with new items purchased or acquired over the course of the year.

As a CC&A Insurance Brokers client, we will meet with you at the time of your annual review. This allows us to work through the contents of you r policy together. This way, we are able to highlight areas that may need to be re-assed in order to ensure you have the very best cover available to you.

If you’d like to look into your cover in more detail, give your broker a call today.