01 / The meaning
What it means.
The comparison must use the policy’s required valuation basis. Rebuilding or replacement values can differ substantially from accounting or market values. Some average clauses include a threshold, tolerance or waiver, while others have different formulas and exceptions. It is therefore unsafe to apply a standard percentage calculation without first checking the exact clause, relevant property grouping and valuation date.
A simple proportional illustration helps show the risk: if a clause applies a 50% insured-to-required-value ratio, it could reduce the calculated damage amount by that ratio before other adjustments. That is an illustration, not a universal settlement formula. Review values when stock peaks, equipment is added or rebuilding costs change. A deliberately low sum can leave both a total-loss shortfall and a smaller-than-expected contribution to a modest repair.
02 / Put it in context
A practical example.
Hypothetical example: a workshop increases its machinery holdings but leaves its contents sum unchanged. After damage to one machine, it checks whether the policy compares that sum with the value of all relevant contents and whether an average provision applies.
This example illustrates the term. It does not predict a claim outcome.
03 / Read the detail
What to check.
- Locate the exact formula, tolerance, waiver and exceptions in the wording.
- Use the required valuation basis for the correct group of insured property.
- Review additions, peak stock and changing replacement costs before renewal.
04 / Start a useful conversation
A question for your broker.
Could an average provision reduce a partial claim, and what valuation evidence shows that our selected amount is appropriate?
05 / Connect the terms
Keep the meaning in context.
06 / Apply it to your business
Related insurance guides.
Further reading
Read the source guidance alongside the relevant policy wording.
General information only. This does not take into account your objectives, financial situation or needs. Before acting, consider whether the information is appropriate for you. Cover is subject to insurer acceptance and the policy terms, conditions, limits and exclusions. Read the Financial Services Guide and the relevant PDS (where applicable) and/or policy wording before deciding.
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