If you have underinsured your home and there is a loss then the “Average Calculation” will apply.
The concept of Average is:
For partial damage, all homes that are not fully insured become subject to Average and you are your “own insurer” for uninsured value.
Average is the rate-able portion of the full value against the insured value to each and every loss and is calculated as:
(Insured value of home/Full value of home) x Loss
e.g. Full value of home – $200,000
Insured value of home – $150,000
Loss – $50,000
Average = (150/200) x 50,000 = $37,500
So, of the $50,000 loss, you would be paid $37,500 less any applicable deductible.