The principle of average applies when the value is _____________ in the proposal.

Question

Question: The principle of average applies when the value is _____________ in the proposal.

Options:

1. Understated
2. Overstated
3. Not ascertainable
4. Negligible
5. Only sentimental

Answer 1

1. Understated

The principle of average applies when the value is understated in the proposal.

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More info:

Condition of average is a term used when calculating a payout against a claim where the policy undervalues the sum insured.

The principle of average applies when the value is understated in the proposal.

It allow insurers to reduce their liability for the damage in proportion to the amount of under insurance.