Introduction
Insurance policies can often be complex and difficult to understand. One such clause that policyholders may come across is the Average Clause. In this blog post, we will dive into what the Average Clause is, how it works, and what it means for policyholders. We will specifically discuss the Average Clause in the context of Bimakavach, a leading insurance company.
What is the Average Clause?
The Average Clause is a provision found in many insurance policies, including those offered by Bimakavach. It is designed to ensure that policyholders bear a proportionate share of the loss in the event of underinsurance. In simple terms, it means that if the insured property is undervalued at the time of the claim, the insurance company will only pay out a proportionate amount.
How does the Average Clause work?
Let’s say you have insured your property for a value of $500,000 but its actual value is $1,000,000. If you suffer a loss due to an insured event, such as a fire, and the damage is estimated to be $200,000, the insurance company will apply the Average Clause. Since the property is underinsured by 50%, the insurance company will only pay out 50% of the claimed amount, which is $100,000. You will be responsible for the remaining 50% of the loss.
The Importance of Understanding the Average Clause
It is crucial for policyholders to understand the implications of the Average Clause. Failing to accurately assess the value of their property can result in significant financial consequences in the event of a claim. To avoid being underinsured, it is advised to regularly review the value of insured property and update the policy accordingly. Bimakavach, as a reputable insurance company, provides detailed information about the Average Clause to its policyholders, helping them make informed decisions when selecting coverage.
Conclusion
The Average Clause is an important aspect of insurance policies that policyholders should be aware of. It ensures that in the event of underinsurance, policyholders bear a proportionate share of the loss. Bimakavach, as a responsible insurance company, includes the Average Clause in its policies to protect both the insured and the insurer. By understanding this clause and regularly reviewing the value of insured property, policyholders can ensure they have adequate coverage in the event of a claim.
