GULF INSURANCE LIMITED AVERAGE NOTICE/ADVISORY
Gulf Insurance Ltd.’s policy contract is based on Indemnity and is subject to an “Average Provision”.
Indemnity aims to place the insured in the same financial position (after a loss) that he or she would have enjoyed immediately prior to a loss.
An “Average Provision” is applicable if the Sum Insured declared on the value of the property is less than the Assessed Value to rebuild/repair the property at the time of a claim/loss. This provision is used to determine the value of the property which is deemed to not have been covered by the policy i.e., effectively self-insured by the policyholder.
The statement below shows the method for assessing the Average Provision used by Gulf.
Step 1 - Sum Insured / Assessed Value = % Covered
Step 2 - % Covered × Claim = Amount Due to Policyholder
Practical Example
If the:
- Declared Sum Insured on Policy = $1,000,000
- Assessed Value of property at the time of loss = $1,500,000
- Claim/Loss incurred = $750,000
Step 1 - 1,000,000 / 1,500,000 = 66.67%
Step 2 - 66.67% × 750,000 = 500,000
Therefore, Gulf would settle $500,000 to policyholder and the policyholder be responsible for the balance of the claim/loss of $250,000.
To avoid the ‘Average Provision’ being applied at the time of a claim/loss, we recommend that you utilize the services of a professional valuator or assessor to confirm your sum insured regularly.
