Can you provide a calculation/example of how the Condition of Average principal would operate?
October 30, 2020
Rebuilding Cost of the Home
Policy Sum Insured
In the above example, the policy sum insured is only 50% of the rebuilding cost (i.e. $100,000 / $200,000). Since this is outside the 85% concession allowed by the policy, the amount paid is reduced by the degree of under-insurance. The degree of under-insurance is 50%. So the amount claimed ($75,000) is reduced by 50% to $37,500.
If your sum insured was $170,000, this equates to 85% of the rebuilding sum insured – the amount claimed of $75,000 would be paid in full.