Waiver of Underinsurance
The insurer contractually waives reliance on the average clause where underinsurance is established, and indemnifies in full up to the sum insured, provided the value was determined under the agreed valuation method.
- Clause type
- Extension
- Origin/Market
- German market
- Favours
- Insured
- Negotiability
- Negotiable
Purpose
The statutory average clause protects the insurer against an under-calculated sum insured, but can cause unexpected coverage gaps for private homeowners in particular, where the value was assessed by a layperson. Under a waiver of underinsurance, the insurer accepts the risk of a valuation error made under an agreed assessment procedure and gives up reliance on a proportionate reduction at claims stage.
Effect and limits
The waiver usually applies only where the sum insured was calculated under a valuation method prescribed or recognised by the insurer (for example, a living-area or value-index method) and has since been updated in line with the agreed adjustment mechanism. If subsequent increases in value – for instance through extensions or value-enhancing renovation – were not reported, the waiver may lapse or be limited to the original basis of calculation.
Negotiation and practice
The waiver of underinsurance is a key selling point in residential buildings insurance and is usually combined with index-linked replacement value cover that automatically adjusts the sum insured to a construction cost index. For commercial risks, insurers typically require a regular, documented valuation by independent surveyors before granting a comparable waiver.
Legal basis
- DE: Section 75 VVG (non-mandatory rule being waived)
- CH: VVG Art. 51a (non-mandatory rule being waived)