A Commercial Building which has been insured for ₹6 crores, but Insurance Premium has been paid on a Sum Insured of ₹3 crores only. There is a Loss of ₹2 Crores Worth of Property due to some Fire Accident. Calculate the

This is a case of Under Insurance. The Consequences of Underinsurance increases out of pocket expenses. In this case under the Average Clause, Policyholders agree to maintain a Specific Percentage of Insurance Coverage based on the Property's Actual Value. The Average Clause operates on a proportional basis. Here's the typical formula used to calculate the insurer's liability: Claim Payout = (Insured Amount / Actual Value) × Loss Amount The Average Clause is an essential provision in insurance agreements designed to mitigate the risk of underinsurance. It ensures that policyholders share the financial responsibility proportionately if they choose to underinsure their property. Actual Value of Property (V): ₹6 crores Insured Amount (I): ₹3 crores Loss Amount (L): ₹2 crores Claim Amount = (Insured Amount / Actual Value) × Loss Amount = (₹3 Crores / ₹6 Crores) × ₹2 Crores = ₹1 Crore.