Home » Past Questions » Commerce » \(\begin{array}{c|c} \text{Name} & \text{Insure amount} & \text{Actual value} & \text{Actual loss} \\ \hline \text{Mr A} & 30,000 & 100,000 & 40,000 \\ \hline \text{Mr B} & 40,000 & 120,000 & 50,000 \\ \hline \text{Mr C} & 50,000 & 15,000 & 70,000 \\ \end{array}\)If Mr A takes a fire insurance policy with average clause, his compensation will...

\(\begin{array}{c|c} \text{Name} & \text{Insure amount} & \text{Actual value} & \text{Actual loss} \\ \hline \text{Mr A} & 30,000 & 100,000 & 40,000 \\ \hline \text{Mr B} & 40,000 & 120,000 & 50,000 \\ \hline \text{Mr C} & 50,000 & 15,000 & 70,000 \\ \end{array}\)If Mr A takes a fire insurance policy with average clause, his compensation will...


Question

\(\begin{array}{c|c} \text{Name} & \text{Insure amount} & \text{Actual value} & \text{Actual loss} \\ \hline \text{Mr A} & 30,000 & 100,000 & 40,000 \\ \hline \text{Mr B} & 40,000 & 120,000 & 50,000 \\ \hline \text{Mr C} & 50,000 & 15,000 & 70,000 \\ \end{array}\)

If Mr A takes a fire insurance policy with average clause, his compensation will be

Options

A) N15,000

B) N20,000

C) N12,000

D) N25, 000

The correct answer is C.

Explanation:

Since the policy is with average clause the formula used in calculating his compensation is

\(\frac{\text{Amount insured x total actual loss}} {\text{Total actual value of property}}\)

By this formula the compensation will be

Amount insured = N30,000

Amount loss = N40,000

Actual Value = N100,000

=\(\frac{30,000 \times 40, 000}{100,000}\)

= \(\frac{1200000000}{100,000}\) = 12,000


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Dicussion (1)

  • Since the policy is with average clause the formula used in calculating his compensation is

    \(\frac{\text{Amount insured x total actual loss}} {\text{Total actual value of property}}\)

    By this formula the compensation will be

    Amount insured = N30,000

    Amount loss = N40,000

    Actual Value = N100,000

    =\(\frac{30,000 \times 40, 000}{100,000}\)

    = \(\frac{1200000000}{100,000}\) = 12,000

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