Explain "Average Clause" term in Insurance Agreements.

The Average Clause in insurance is a provision that applies when your property is undervalued or underinsured at the time of policy purchase. It affects the claim settlement in case of a partial loss due to fire. A partial loss is when your property is not destroyed by fire but only partially damaged. The insured knows best about the property which he would like to insure. Hence, in his own best interest, while completing the proposal form, he must declare the full value of the property. In the event of a partial loss, the value to the extent it is underinsured would have to be borne by the insured. He would be his own insurer for that portion of the property damaged, which has not been insured because of inadequacy in value insured Average clause enumerates - If the property hereby insured shall at the breaking out of any insured peril be collectively of greater than the sum insured thereon, then the insured shall be considered as being his own insurer for the difference, and shall bear a rateable proportion of the loss accordingly.