Business MenCommercial insurance policies contain a number of unique and varying clauses which are applied by the various insurers that operate in this market.
One clause that remains a constant is the inclusion in almost all commercial property and strata insurance policies – this being the ‘Co-Insurance’ or ‘Average’ clause.

This clause can have a significant impact on the policy holder in the event of a claim if not properly addressed at the inception of a policy.
As your Insurance broker, we take the responsibility to adequately advise and protect your interests against the implications this clause may have on your business in the event of a claim.

For your reference, a ‘Co-Insurance’ or ‘Average’ clause state that a property must be insured for its ‘full replacement value’. If a loss occurs and the insurer assessment shows that the property was not insured for its full replacement value, the insurer has the right to reduce the claim settlement by the equivalent percentage difference between your insured value and the actual replacement cost.
The potential for a portion of a loss to be deemed uninsured, forcing your business to meet the difference from its own working capital is too great a risk not to properly address.

To see how this clause may be applied in a real claim example please refer to the calculation shown below;

Real claim example

A simple example illustrating the basic principle, application and effect of the Average / Co-Insurance clause is as follows:

Full Value of the Property Insured = $ 1,000,000
Policy Sum Insured / Declared Value = $ 500,000
Therefore you would be self insured for 50% of the full value.
Amount of Claim = $ 100,000

Amount Payable by the insurer as a result of the application of the Average / Co-Insurance clause

To ensure our clients are adequately insured and protected from such uninsured loss CIS provide a free commercial property calculation service upon inception of a new policy and at every policy renewal.
While this building estimate should never be used in replacement of a property valuation, it does provide a quantified estimation of your building costs enabling you to comfortably declare a replacement sum insured that is in line with market replacement cost.
This service is provided at no charge to our clientele and is available at any stage in the policy period upon your request.

Additionally, CIS have partnership programs with licensed real estate valuers and quantity surveyors who can provide specific market and replacement valuations on a discounted basis to CIS clients.
Refer to our ‘partners’ tab on the home page, then select ‘service partners’ .
A description of each partners services will guide your decision, refer in particular to ‘LMW Hegney Glendennings’ for property valuation and ‘Washington Brown’ for a quantity survey.
By clicking on the links of the service partners you will be taken to the relevant website for contact and pricing details.
On a case-by-case basis, CIS will consider a co-contribution to these costs to further ensure the accuracy of the replacement values set – contact your broker to enquire about this.