What Is the Sum Insured?
The sum insured is the maximum amount your insurer will pay for a claim under the buildings section of your home insurance. For buildings insurance, this figure should reflect the full cost of rebuilding your home from the ground up — including foundations, walls, roof, fixtures, and professional fees such as architects and surveyors.
Crucially, the rebuild cost is not the same as the market value of your property. A house worth €400,000 on the open market may cost €250,000 to rebuild — or more, depending on construction type, location, and current material and labour costs. Setting your sum insured based on market value is a common cause of over-insurance. Setting it too low — or not reviewing it annually — is a common cause of under-insurance.
What Is the Average Clause?
The average clause (also called the co-insurance clause or condition of average) is a standard provision in most Irish home insurance policies. It allows the insurer to reduce your claim payout proportionally if your sum insured is less than the true rebuild cost at the time of the claim.
The formula applied is:
- Payout = (Sum Insured ÷ True Rebuild Cost) × Claim Amount
In practice, the insurer is treating you as a co-insurer for the portion of value you failed to cover. You bear that share of any loss proportionally.
A Real Example
Example
Your home is insured for €200,000. A surveyor assesses the true rebuild cost at €300,000. You suffer storm damage and lodge a claim for €30,000.
Applying the average clause:
(€200,000 ÷ €300,000) × €30,000 = €20,000
The insurer pays €20,000. You cover the remaining €10,000 yourself — despite paying premiums and believing you were fully insured.
The outcome is the same whether the claim is for a partial loss or a total loss. If the average clause applies, every claim is affected proportionally.
Why This Matters in Ireland Right Now
Rebuild costs in Ireland have increased significantly in recent years due to rising construction material costs, labour shortages, and planning and compliance costs. The Society of Chartered Surveyors Ireland (SCSI) publishes annual rebuild cost guides that reflect current rates.
A sum insured set three or four years ago may already be materially below the current rebuild cost — without any changes to the property. Policyholders who have not reviewed their sum insured in line with construction cost inflation may be under-insured without realising it.
How to Check Your Sum Insured
The sum insured for buildings is shown on your policy schedule — the 2–4 page summary document attached to your main policy wording. To assess whether it is adequate:
- Use the SCSI House Rebuilding Cost Calculator as a starting point (available on the SCSI website)
- Consider commissioning a professional rebuild cost assessment for older, larger, or unusual properties
- Check whether your policy includes index-linking — some policies adjust the sum insured annually in line with a published construction cost index, which reduces (but does not eliminate) the risk of under-insurance
What Your Policy Document Will Say
The average clause may not use the phrase "average clause" directly. Look for language such as:
- "If the sum insured is less than the cost of reinstatement at the time of loss..."
- "...you will be considered your own insurer for the difference..."
- "...the amount payable will be reduced proportionately."