Superquote Terms / Glossary: Average

The principle of average applies when there is under insurance on an insured risk. It effectively means that any payment for a claim will be proportionally reduced, in line with the under insurance.

As an example, if John insures his home contents for £25,000 but their true value is £50,000, he is underinsured.  If a claim occurs, John will be paid out at the same proportion as his underinsurance.  Therefore if a £10,000 claim is made, John will receive just £5,000.

This is why it is important to disclose all material fact at the quote stage of dealing with an insurer.