The sum insured on a property insurance policy includes a 15% margin for error. What is this an example of?

This situation is an example of a reinstatement memorandum clause. The inclusion of a 15% margin for error within the sum insured is indicative of a reinstatement clause, which ensures that in the event of a loss, the insured will have the cost of reinstating the property covered, without the insurer being able to deduct any depreciation. This margin allows for fluctuations in building costs and can provide an added layer of protection to ensure that the insured amount is adequate to cover potential rebuilding or repair expenses.

In a reinstatement memorandum, the margin helps address scenarios where the actual costs may exceed the sum insured due to unexpected increases in material or labor costs, or changes to building regulations that require additional expenditures. It is crucial for policyholders to understand this clause, as it ensures their property is adequately insured to its full reinstatement value, mitigating the risk of underinsurance.

Other options, such as basic cover, betterment, and day one reinstatement, pertain to different aspects of insurance policies and do not specifically address the provision for a margin in the sum insured, hence they do not fit the context of this question. Basic cover typically relates to the fundamental protections offered by a policy, betterment refers to improvements made beyond what was originally insured, and