Wordings Library
Valuation
Clause explained
Average / Underinsurance
Reduces a claim proportionately when the insured value is below the value required by the policy.
01
Meaning
Reduces a claim proportionately when the insured value is below the value required by the policy.
02
Why insurers use it
To link premium and recovery to an adequate declaration of the value at risk.
03
Effect on coverage
Even a partial loss may be reduced; some policies use tolerance, margin, or first-loss arrangements instead.
04
Illustrative example
Property worth OMR 7m is insured for OMR 4m and suffers an OMR 2m loss.
05
Claim consequence
A simple pro-rata average could reduce the loss to about OMR 1.143m before deductible and other adjustments.
06
What the insured should negotiate or check
Check valuation basis, value at risk date, tolerance, escalation, stock peaks, and whether average applies by item or location.
Policy-wording boundary: This is educational analysis. Confirm the complete policy, schedule, endorsements, applicable law, and written insurer position for any specific placement or claim.