Home Contents Guide

Underinsurance and the average clause

Written by Chloe Adams Managing Editor Reviewed by Nomsa Dlamini RE5 qualified · 12 years in short-term insurance Updated 16 September 2026 Our editorial standards →

What is the average clause on home insurance?

The average clause is how insurers deal with underinsurance. If your sum insured is lower than the true replacement value of your contents, the insurer settles claims in the same proportion. Insure for roughly 60 percent of the real value and a claim is paid at about 60 percent, even for a small loss. Insuring for the full replacement value avoids it entirely.

Key takeaways

  • The average clause reduces payouts when you are insured for less than the full replacement value.
  • It applies to partial losses too, not just when everything is destroyed.
  • The reduction is roughly proportional to how far your sum insured falls short.
  • It appears on both contents and buildings policies.
  • Insuring for the full, up-to-date replacement value is the only reliable way to avoid it.

How the average clause works

Insurers price your premium on the assumption that your sum insured reflects the true value of what you own. When it does not, the average clause brings the payout back into proportion. In simple terms, if you insure for only part of the real value, the insurer pays only that part of any claim.

As an illustration of the mechanism, if your contents are worth R500 000 but you insured them for R300 000, you are covered for about 60 percent of their value. A R50 000 claim could then be settled at around R30 000, less the excess, because the same 60 percent proportion is applied.

Why it catches people out

The clause surprises people because it applies to everyday partial claims, not just total losses. Many assume that a R50 000 theft claim will be paid in full as long as the sum insured is above R50 000. In fact, if the overall contents are underinsured, that proportional reduction still applies. The shortfall you never noticed becomes very visible at claim time.

How to avoid it

The fix is straightforward: insure your contents for their full replacement value and keep that figure current. Practical steps are:

Our guide on setting your contents sum insured walks through the method.

The same rule on buildings cover

The average clause is not unique to contents. Buildings policies apply it too, based on the cost to rebuild your home, which is why an accurate rebuild figure matters just as much. If you have both policies, check that neither sum insured has fallen behind. When comparing cover, make sure every quote uses the same, realistic values so you are comparing like with like rather than a cheaper premium that hides underinsurance.

Frequently asked questions

Does the average clause apply to small claims?
Yes. That is what surprises people. The proportional reduction applies to partial claims, not only total losses. If your contents are underinsured overall, even a modest claim is scaled down by the same proportion, then reduced further by your excess. Being fully insured is what keeps small claims paid in full.
How do I know if I am underinsured?
Compare your current sum insured with a fresh room-by-room replacement valuation at today's prices. If the honest total is higher than the figure on your policy, you are underinsured and exposed to the average clause. Contents tend to grow over time, so a figure set years ago is often well short.
Do all insurers apply the average clause?
Most South African home policies include an average or underinsurance provision, though the exact wording varies. Some products waive it or offer automatic inflation adjustments. Always read the policy wording to see how underinsurance is handled and whether any protection against the average clause is built in.
Can I avoid the average clause completely?
Yes, by insuring for the full replacement value and keeping that figure up to date. Some policies also offer features that reduce the risk, such as automatic annual increases. The safest approach is an accurate sum insured reviewed each year, so your cover keeps pace with what you actually own.

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