What is the purpose of an "adjustment clause" in an insurance policy?

An adjustment clause in an insurance policy serves to allow for premium adjustments based on specific factors. This means that it outlines conditions under which the premium amount can be altered, reflecting changes in risk exposure or other relevant factors that may influence the cost of insurance coverage. For instance, if the insured property increases in value or if there are changes in the risk environment, an adjustment clause can trigger a reevaluation of the premium.

This feature is particularly important as it helps ensure that premiums remain appropriate relative to the current level of risk. It also provides flexibility for both the insurer and the policyholder, allowing adjustments to be made without the need for completely rewriting the policy. By facilitating adjustments, the adjustment clause contributes to maintaining fairness in premium pricing over the life of the insurance coverage.