Full Reporting Clause

What is 'Full Reporting Clause'

A full reporting clause, also known as an honesty clause, is a provision to an insurance policy requiring the policyholder to provide the insurer with the value of insured items. Property insurance policies contain full reporting clauses.

BREAKING DOWN 'Full Reporting Clause'

Determining the cost of articles covered by an insurance policy is an essential part of insurance contracts. While it is a time-consuming step, it allows individuals and businesses to estimate the total amount of coverage they need. Understanding how much an item is worth lets insurers determine replacement costs when losses occur.

Because keeping the values current is necessary, insurers may require the policyholder to determine the values of all insured items and provide a report to the company. The requirement is outlined in the policy’s full reporting clause. A full reporting clause requires the insured to update the value of items covered in the policy periodically. For example, the full reporting clause may state that the policyholder is required to provide an update to the agent or insurer within 30 days of the last reporting period. Typically, the insured records the items and their values on a form provided by the insurer.

Consequences of Non-Compliance

Insurers may assess penalties to guarantee that the insured reports property costs by the full reporting clause. If the insured fails to provide the value of items covered under a policy, the insurer may limit the amount payable on a claim. The amount of coverage limit will depend on the language in the policy. The company may use the most recent policyholder-reported values or may limit the loss payment to a percentage of the amount that the insurer would be otherwise liable.

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

Full Reporting Clause Usage

Property insurance coverage is the most likely place to find full reporting clauses. The type of property insured includes a broad category of items, such as cargo and buildings. Policies that include a full report clause may also include a valuation clause, showing property value assessment. For structures, this value is the “completed value” and can consist of the original cost, labor and materials, and profit.