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INSURANCE LAW - Property Insurance
Related Topics : Auto Insurance . Business Insurance . Disability Insurance . Health Insurance . Insurer's Bad Faith . Life Insurance Law . Property Insurance


House Owner & House Holder Insurance


Application of the Average Condition
[see condition 6 of your policy]

This condition enables your insurer to  penalize you if you under-insure the building and/or contents of your home.

You are said to be under-insured if the Sum Insured (SI) at the time of the loss is less than the actual value of the insured property. Please refer to Valuation for Building or Valuation for Contents for further information.

In such a case, this condition will operate to penalize you as shown below.

For example, the SI  is RM90,000 while the value of the insured property is RM120,000 and the loss is, say, RM3,000 - average will operate as follows:

  S I : RM90,000  X  Loss  : RM 3,000
Value : RM120,000


Insurers would pay only RM2,250 instead of RM3,000. This means that you have to bear RM750 yourself.

In such a case, you are considered as being your "own insurers" for the difference.

The rationale is that, by not insuring for the full value of your property, you had 'underpaid' your premium. It is therefore only fair that your claim should also be proportionately 'underpaid'.

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