Average adjustment

Average adjustment is a method used in insurance when a claim is made for damage or loss. It involves comparing the actual repair or replacement costs to the insurance company's standard or estimated costs. If the actual costs are higher or lower, the insurer adjusts the payout accordingly to fairly reflect the true circumstances. This ensures the payout accurately represents the genuine expense incurred, avoiding over- or under-compensation. Essentially, average adjustment helps balance the insurance claim to match what was reasonably spent or needed to restore or replace the damaged property or item.