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Condition of average (also called ''underinsurance'' in the U.S., or ''principal of average'', ''subject to average'', or ''pro rata condition of average'' in Commonwealth countries) is the insurance term used when calculating a payout against a claim where the policy undervalues the sum insured. In the event of ''partial'' loss, the amount paid against a claim will be in the same proportion as the value of the underinsurance. The formula used is :: where ''Payout'' is the amount paid out by the policy, ''Claim'' is the amount claimed against the policy after a loss, ''Sum Insured'' is the maximum amount to be paid out by the policy, and ''Current Value'' is the value the policy should be insured for. Underinsurance occurs when ''Sum Insured'' is less than ''Current Value''. ''Sum Insured'' is the maximum amount that can be paid out and is only paid out in cases of ''total'' destruction. Where partial destruction occurs (a more common occurrence than total destruction), ''Payout'' is pro rata in line with the underinsurance. This is due to insurance companies basing the premiums on their risk of losing the full ''Sum Insured'' against total destruction events. == Buildings insurance == Where a building's insurance policy is subject to average, underinsurance can result in very high liabilities on the owner. For example, if a flood or fire causes $3M of partial damage, the building is insured for $5M, but its true value is determined to be $10M, the payout will be :: This would leave the owner with an underinsurance shortfall of $1.5M. In the case where a building is listed and has a mandatory rebuild order, it could be ruinous. Under certain conditions, if the sum insured is 75% or more of the current value, no deduction is made for partial losses. == Contents insurance == The contents of buildings are insured either separately from the buildings, or, frequently with dwelling houses, as a separate part of a combined buildings/contents insurance policy. Whether separate or joint policies are used, the insurance claim on either part cannot be transferred to the other, for example, underinsurance of the contents cannot be offset by the claim made on the buildings insurance. When contents insurance states that ''new-for-old'' applies, this increases the likelihood of underinsurance. For example, a quantity of items amongst the contents might have a low ''resale value'' but a high new-for-old value. This can happen if quantities of used or second-hand goods are collected; their resale value may be low, but to replace as-new would require a high payout against the policy. In such a case, if the policy is subject to average, any claim will be reduced by the value of the underinsurance. Crucially, this occurs with partial loss of the contents, even where the low-resale value contents are completely undamaged and may even be stored separately, as in an undamaged outhouse covered as part of the policy. Due to the potentially high shortfall burden, some countries, notably New Zealand, mandate that all policies subject to average have the policyholder acknowledge the risks of underinsurance; the statute giving the following example to be incorporated into the policy:
To remove the risk of homeowners unwittingly falling into an underinsurance trap, New Zealand has legislation to ban the use of average clauses for dwelling houses. == Cargo insurance == (詳細はlaw of general average. Average clauses can cause problems with claims made during periods of volatility in commodities markets. For example, if crude was being shipped from one part of the world to another, and a partial loss occurred, if its current value had risen, the amount paid out by the insurance company may not cover the value of the contract. 抄文引用元・出典: フリー百科事典『 ウィキペディア（Wikipedia）』 ■ウィキペディアで「Condition of average」の詳細全文を読む スポンサード リンク
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