Margin Clause
The margin clause grants a percentage uplift on declared insurance values, protecting against the consequences of unintended underinsurance caused by value fluctuations.
- Clause type
- Extension
- Origin/Market
- Swiss market
- Favours
- Insured
- Negotiability
- Negotiable
Purpose
Insurance values age quickly: construction cost inflation, exchange rates, stock fluctuations and investments constantly change the exposure. The margin clause (typically 10 to 30 percent) absorbs such deviations without the need for constant re-declarations.
Effect and limits
Provisional sums increase the sum insured on a flat basis; genuine margin clauses additionally waive the underinsurance defence within the margin. In declaration-based stock policies, periodic stock declarations partially replace the margin. The margin does not replace proper valuation: in case of systematic under-declaration, the insurer may claim reductions of indemnity and remove or reprice the clause at renewal; the margin also only covers the agreed percentage above the declared value, not the full loss beyond that.
Negotiation and practice
The size of the margin (typically 10 to 30 percent) and whether it is agreed with or without a waiver of the underinsurance defence are the key negotiation points. Regularly updating the statement of values reduces the risk that the margin proves insufficient at the time of loss.