Homeowner Guide

What happens if my property is underinsured?

Most homeowners have never heard of the "average clause" until they make a claim and find out their payout has been cut. Here's exactly how it works.

Check My Cover What Is an RCA?

The Average Clause

Insurers don't just refuse to pay — they pay less on everything.

If your sum insured is lower than the true reinstatement cost of your property, most UK policies reduce every claim payout by the same proportion — not just on total losses, but on every claim, however small.

The formula insurers use is straightforward:

Payout = Claim Amount × (Sum Insured ÷ True Reinstatement Cost)

Worked Example

A real-world example.

Your home's true reinstatement cost is £400,000, but your policy's sum insured is only £300,000 — you're insured for 75% of what it would actually cost to rebuild.

A kitchen fire causes £20,000 of damage. You might expect your insurer to pay the full £20,000 since it's well within your sum insured. Under the average clause, they don't:

£20,000 × (£300,000 ÷ £400,000)

= £15,000

paid out, not £20,000

You're left to find the remaining £5,000 yourself, out of pocket, for a claim that was well within your policy limit. The 25% shortfall in your sum insured cost you 25% of every claim you'll ever make on that policy.

Protecting Yourself

The fix is straightforward.

A RICS-regulated Reinstatement Cost Assessment gives you the true, current rebuild cost of your property, so you can set your sum insured correctly — protecting you from the average clause on every future claim.

Not sure if this applies to you? Start with Do I Need a Reinstatement Cost Assessment? or see what it costs to find out.

Why Stearling Reinstatement

The trusted choice for homeowners.

RICS Regulated

Every assessment is carried out by or under the supervision of a RICS-registered member.

Fully Insured

Every instruction is covered by comprehensive professional indemnity insurance for your protection.

24-Hour Response

We respond to every enquiry within 24 hours and deliver on the timescales we agree.

Insurer-Ready Report

A clear, defensible figure accepted by every UK insurer and broker, without amendment.

Explore Further

Related homeowner guides

What Is an RCA?

A plain-English explainer - what it is, and why it's not the same as market value.

Read the guidearrow_forward

RCA vs Market Value

A clear, visual comparison of the two figures - and why they diverge.

Read the guidearrow_forward

Do I Need One?

The specific situations that mean it's time to get an assessment.

Read the guidearrow_forward

FAQ

Common questions.

Questions homeowners ask about underinsurance and the average clause.

Every claim. It applies proportionally regardless of the size of the loss, which surprises most homeowners - even a relatively minor claim, like a burst pipe causing a few thousand pounds of damage, gets reduced by the same percentage as your underinsurance.

The only reliable way is a professional Reinstatement Cost Assessment. Comparing your sum insured to what you paid for the property or its current market value won't tell you anything useful - see Reinstatement Cost vs Market Value for why.

Most standard UK buildings insurance policies include an average clause, though the exact wording varies. Always check your policy document, but assume it applies unless you've specifically confirmed otherwise.

Get a current Reinstatement Cost Assessment. It's a fixed, modest cost that either confirms your existing sum insured is correct, or gives you an accurate figure to update it - either way, you'll know where you stand before you ever need to make a claim.