Understanding the Average Clause in insurance - Why getting it right matters

Insurance policies are contracts and like all contracts, they come with terms and conditions that can impact your cover. One particularly important clause to be aware of when insuring a wedding venue is ‘The Condition of Average’, or more commonly known as ‘The Average Clause’.

What is the Average Clause?

Let’s break it down in simple terms.

When taking out building insurance for your wedding venue, you need to decide how much cover to arrange. This figure should reflect the full rebuild cost of the property, including all associated expenses, such as materials, labour and professional fees. However, determining this amount is your responsibility, neither your broker nor your insurer will do it for you.

Your premium is then calculated based on the rebuild value you declare.

So, what happens if the amount you insure is too low? This is called underinsurance and we will explain more of the risks and how this will affect any claims on your wedding venue insurance policy further below.

Why underinsurance is a risk?

Imagine you insure your wedding venue building for £500,000, but in reality, the full rebuild cost should be £1,000,000. This means you’ve only insured half of what you should have, and as a result, your insurer has only received half the premium they would need to fully cover the building.

Now, if a total loss occurs, it’s unlikely that your insurer would pay out the full £1,000,000 because your policy only covers £500,000. This part makes sense, right?

The catch...partial claims apply

Here’s where the average clause makes things even trickier.

Say a vehicle crashes into your wedding venue, causing £10,000 worth of damage. You might assume that since your venue is insured for £500,000, you’d receive the full amount for the £10,000 claim.

Unfortunately, that’s not how it works.

Because your sum insured is only 50% of what it should be, the insurer will only cover 50% of any claim. This means you would only receive £5000, leaving you to pay the remaining £5000 out of your own pocket – which is the best possible scenario. The way the average clause is applied can be even more complicated, meaning you could receive even less.

How to avoid the pitfalls of the average clause

The only way to steer clear of the dreaded average clause is to ensure your building is insured for the correct amount. The best way to decide this is to get a professional assessment of your rebuild cost from a qualified expert. Rather than guessing or relying on outdated valuations, you can arrange a rebuild cost assessment using trusted professionals in building insurance valuations. With an accurate valuation, you can avoid the risk of underinsurance and ensure your wedding venue insurance fully covers you when you need it most.

You can check out sources such as RebuildCostASSESSMENT.com for arranging building valuations.

Protect your business the right way and get your building sums insurance right from the start.

Wedding venue insurance is an essential part to running a successful venue and ensuring the correct valuations have been assessed will help protect your business. If you’re unsure whether your current policy provides adequate cover, speak to a member of our team today by emailing info@weddinginsurancegroup.co.uk or call and speak to one of our experienced account handlers on 0121 550 2380, Mon- Fri, 9am – 5pm.