Full Reporting Clause

DEFINITION of 'Full Reporting Clause'

An insurance policy provision requiring the insured party to provide the insurer with the value of insured items. Full reporting clauses are found in property insurance policies.

Also known as honesty clauses.

BREAKING DOWN 'Full Reporting Clause'

Determining the value of items covered in an insurance policy is a critical component of insurance contracts. It is important to individuals and businesses seeking to purchase insurance because it allows them to estimate the total amount of coverage they need, since higher coverage limits result in higher premiums. For insurers, understanding how much items are worth allows them to determine replacement costs if a loss occurs.

Once a policy is written, determining the current value of the insured property can become a time-consuming endeavor. Because keeping the values up to date is still important, insurers may require the insured to determine the values of insured items and report back to the insurer. This requirement is set forth in the policy’s full reporting clause. A full reporting clause requires the insured to periodically update the value of items covered under the policy. For example, a policy may require the insured to provide an update to the agent or insurer within 30 days of the last reporting period. The insured items and their values are typically written down in a form provided by the insurer.

Insurers may assess a penalty in order to ensure that the insured reports property values in accordance with the full reporting clause. If the insured fails to provide the value of items covered under a policy, the insurer may also limit the amount paid out in a claim. The amount the insurer will limit the claim by depends on the policy language. The insurer may use the most recent values reported, or may limit the loss payment to a percentage of the amount that the insurer would be otherwise liable.

Full reporting clauses are used in property insurance policies. The type of property insured can include a broad category of items, including cargo and buildings. Policies that include a full report clause will typically include a valuation clause indicating how the property value is to be assessed. For structures, this value may be called the “completed value”, and can include the original cost, labor and materials, as well as profit.

Failure to adhere to the clause may have the greatest impact on policyholders who have insured structures. The policy may stipulate that omitting the value of any additions, renovations, or repairs made to a structure will result in no coverage being extended to these items. Once a loss occurs, it can be difficult – or impossible – to make adjustments to the value reported.