The average clause is the single most expensive sentence in an Irish home or commercial insurance policy. If your sums insured are below the actual rebuild or replacement cost, the average clause reduces your settlement by the same proportion. Most policyholders never read it. Here is how it works, what triggers it, and how to defend against it when you claim.
How the average clause works
The clause is straightforward in principle. If your buildings sums insured cover only 75% of the actual rebuild cost, the insurer will pay only 75% of any claim under that section. A 50,000 euro claim becomes a 37,500 euro settlement. The shortfall is the policyholder’s to absorb.
The same clause applies separately to contents. A separately under-insured contents schedule reduces contents settlements pro-rata, even where the buildings sums are accurate.
When the average clause is invoked
The insurer’s loss adjuster reaches an opinion on the actual rebuild cost during the claim assessment. If that figure exceeds the policy’s buildings sums insured, the average clause is mentioned in the offer letter, often without much explanation. The reduction is presented as a fact rather than a position to be negotiated.
It is not always a fact. The rebuild cost the insurer uses can be challenged on three grounds:
- The methodology used to estimate the rebuild cost
- Whether the insurer included items the policy does not actually cover
- Whether the assessment date matches the loss date
Each of these is a legitimate route to push back. We routinely contest average-clause reductions on underpaid settlement claims where the insurer’s rebuild figure looks inflated relative to comparable properties.
Defending against the average clause before a claim happens
The straightforward defence is to keep sums insured current. The Society of Chartered Surveyors Ireland publishes an annual Rebuild Cost Calculator. Construction inflation has been particularly steep since 2020. A figure that was accurate in 2019 is almost certainly understated now.
For non-standard properties (listed buildings, large rural properties, mixed-use, period houses) a one-off Reinstatement Cost Assessment from a chartered quantity surveyor produces a defensible figure. The cost of the assessment is small compared to the average-clause exposure on a real claim.
What if the average clause has already been applied to my claim
If the loss adjuster has cited the average clause and reduced your offer, do not sign anything until you have had it reviewed. Many average-clause reductions stand up to scrutiny; many do not. The insurer’s rebuild figure is an opinion, not a verdict, and a properly evidenced counter-position can recover all or part of the deduction.
Where the underlying claim was rejected outright on grounds beyond the average clause, that is a separate route via rejected claim help.
When to call a loss assessor
If your offer letter mentions the average clause, ring before you sign. The reduction may be correct; it may also be entirely defensible. We carry out the rebuild-cost analysis ourselves and present the counter-case to the insurer.
The five-minute prevention
Average-clause exposure is one of the few insurance risks you can eliminate with a five-minute annual review. Pull the SCSI calculator, plug in your floor area and county, and compare to the buildings sums insured on your renewal letter. If the figures diverge by more than 10%, fix it before you renew.
Written by the team at N.J. Carroll & Associates, insurance loss assessors and quantity surveyors, established 1988.
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