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Understanding Waiver of Average in Insurance: A Guide for Policyholders

Navigating the intricate world of insurance can often be a complex task, especially when faced with industry-specific terminology. This article aims to demystify key terms for those looking to hire loss assessors, make an insurance claim, or simply understand their insurance policy better. At the forefront of this exploration is the concept of "Waiver of Average," a term that significantly impacts how claims are handled.

What is the Use of Average in Insurance?

The term "average" in insurance is vital in determining how claims are settled. It relates to the principle that an insured should bear a portion of the loss if they have underinsured their property. The 'Sum Insured' represents the total amount for which an asset is insured. If this sum is less than the actual value of the asset at the time of loss, the 'average' principle comes into play, proportionately reducing the claim pay-out. This principle ensures that policyholders insure their assets accurately.

Explaining the Average Clause in Insurance Policies

The "Average Clause" is a common inclusion in many insurance policies. This clause activates when the insured value of an asset is less than its actual value at the time of loss.

For example, if a property worth £100,000 is insured for £50,000, and a loss of £20,000 occurs, the insurance company may only pay out £10,000 (50% of the loss), adhering to the 'average' applied. Understanding this clause is crucial for policyholders, particularly when assessing their insurance needs.

The Role of Average in Insurance Claims

In the context of insurance claims, the 'average' can significantly impact the claim amount. When an asset is underinsured, the average clause reduces the claim pay-out. This reduction is a direct consequence of the insured sum being lower than the actual value. Policyholders must be mindful of this when declaring the value of their assets, as it directly affects the compensation received in the event of a loss.

Waiver of Average – What Does it Mean for You?

A 'Waiver of Average' is a term that policyholders seeking to hire loss assessors or make a claim should be keenly aware of. When this waiver is included in a policy, it means that the insurance company agrees not to apply the average principle in the event of a partial loss.

This waiver is particularly beneficial in situations where accurately valuing an asset is challenging. With the waiver, policyholders can receive a full claim pay-out up to the insured amount, even if the asset was underinsured.


Understanding terms like 'Waiver of Average' and 'Average Clause' is crucial for anyone involved in making an insurance claim or considering hiring a loss assessor. These concepts play a significant role in how claims are calculated and settled. As a policyholder, it's essential to ensure that your assets are adequately insured to avoid reduced payouts due to the application of the average. In cases where the exact value is difficult to ascertain, seeking a waiver of average in your policy could be a prudent decision.

By familiarizing yourself with these terms and their implications, you can make more informed decisions about your insurance policies, ultimately leading to better protection for your assets and peace of mind.

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