Find out what you would actually receive from an insurance claim — after excess, depreciation and any co-insurance clauses. Avoid payout surprises by understanding your policy terms before you need them.
Insurance claim payouts are routinely lower than policyholders expect because of three factors: the policy excess (deducted from every claim), depreciation on indemnity policies (you receive current value, not replacement cost), and the average clause (underinsurance penalty that reduces payouts proportionally when the sum insured is below the true replacement value). Understanding all three prevents post-claim surprises.
The average clause (also called the proportionality condition) states: if you are underinsured, your claim payout is reduced proportionally. Example: insured for £40,000 contents, true value £60,000 (underinsured by 33%). On a £5,000 claim: payout = £5,000 × (£40,000 ÷ £60,000) = £3,333 — a £1,667 reduction from expected. This clause is in virtually all property policies and catches many claimants off guard. Review your sum insured annually.
Common reasons for lower-than-expected payouts: (1) Excess deducted — the first £250-£1,000 is always yours to bear; (2) Depreciation — indemnity policies pay current value not replacement cost; (3) Average clause — if your sum insured is below true replacement value, payouts are reduced proportionally; (4) Policy exclusions — specific causes or items not covered; (5) Wear and tear exclusion — damage from gradual deterioration not covered. Always read your policy wording and ask your insurer for a settlement explanation in writing.