19 April 2023

Underinsurance podcast

Inflation over the last few years has caused costs to rise, and as a result this is impacting the sums insured that you should have on your policy.

You could be underinsured without even realising it.

This is because of a condition called the ‘average clause’. Keith explains the average clause, the impact upon both personal and commercial property insurance and how a broker can help you to insure your property for the correct amount.

Everybody who insures property has the potential to suffer from underinsurance and you could be underinsured without even realising it.

So what is underinsurance and how does it affect you?

Changes in inflation over the last few years has caused prices of building materials to rise, and there is an ongoing impact of supply chain and labour shortages caused by Brexit, COVID-19 and the war in Ukraine. As a policy holder, these are impacting the sums insured that you should have on your property.

The vast majority of personal and commercial insurance property policies have a condition called the average clause. This is where the insurer will reduce the claim amount proportionately in line with the amount of underinsurance. This is called applying the average.


The rebuild value of your property is now £100,000, but the property is only insured for £50,000. This means that it is 50% underinsured. So regardless of the value of the claim, insurers will reduce this claim by 50%. So if the claim was for the full insurance amount of £50,000, then the pay-out received would be £25,000.

How can we help?

Inflation and regional differences mean that without properly reviewing somebody’s insurance, you could end up with underinsurance.

Brokers cannot provide advice on the rebuild cost assessment value themselves. However, we can provide access to a rebuild cost assessment company. Paying a small fee for a professional to provide an accurate rebuild value on your property could save thousands in the event of a claim.

To discuss your property insurance with a Chartered Insurance Brokers, or learn more about underinsurance, give us a call on 01270 758070 or contact us.

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R K Henshall & Co Ltd are Independent Intermediaries and are authorised and regulated by the Financial Conduct Authority. Registration Number: 308865. Directors: J.R. Henshall B.A.(Hons) ACII Cert CII (FS), A.J.Simpson ACII, A.Brown FCCA. Written quotations, policy terms, conditions and exclusions are available on request.
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