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

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