Average (in insurance terms)

In insurance, the "average" refers to a method used to adjust a claim when the insured value is less than the actual value of the property or risk. If a property is underinsured, the insurance payout is reduced proportionally. For example, if your property is insured for half its actual value, and a loss occurs, you'll only receive half of the damage costs. This approach encourages proper coverage and ensures that both the insurer and insured share in the risk according to the insured amount.