Three-Fourths Loss Clause

What Does Three-Fourths Loss Clause Mean?

The three-fourths loss clause was a provision in property insurance that stated that an insurance company was not liable to pay more than 75 percent, or three-fourths, of the loss or damage. For example, if you made a claim for $100 worth of property damage covered by your insurance policy, the company would not be required to pay more than $75.

It is no longer in use today but was historically common in property and marine insurance policies.

Insuranceopedia Explains Three-Fourths Loss Clause

Insurance companies used the three-fourths loss clause as a way to encourage policyholders to be more careful with their property and discourage excessive claims. The idea was that because policyholders would have to pay a significant amount out-of-pocket for every claim, they would take more precautions to avoid using their insurance. In exchange, the insurance companies would issue policies with this clause at a lower price. Today, you can set up your policy with a higher deductible to get the same effect: a lower price in exchange for less coverage.