‘Average clause’ in insurance is applicable for which one of the following cases?

Correct option is D

The Average clause is a provision in insurance policies that applies when the insured value of the property is less than its actual value. If the insured property is underinsured, and a loss occurs, the Average clause allows the insurance company to proportionally reduce the amount of compensation paid to the insured.
In the case of underinsurance, the Average clause is invoked to ensure that the insured carries an adequate amount of coverage relative to the value of the property. If the insured property is underinsured, the insurance company will only pay a proportionate amount of the loss, based on the ratio of the insured value to the actual value of the property.
Double Insurance: Double insurance occurs when the same risk is insured by multiple insurance policies. This can happen when the policyholder takes out multiple insurance policies from different insurers covering the same risk. In the event of a claim, the insured may potentially receive compensation from both insurance companies, up to the limits specified in each policy.
Re-insurance: Reinsurance is a process where an insurance company transfers a portion of its risk to another insurance company. Insurance companies purchase reinsurance to mitigate their exposure to large losses or to spread the risk across multiple insurers. In reinsurance, the original insurer, known as the ceding company, pays a premium to the reinsurer, who agrees to cover a portion of the losses incurred by the ceding company.
Over insurance: Over insurance occurs when the insured value of a property exceeds its actual value. This means that the insured has obtained coverage that is more than necessary to adequately protect the property. In the event of a loss, the insurance company will generally only pay out the actual value of the property or the cost of replacement, up to the policy limits. Any excess coverage beyond the actual value may not result in additional compensation.