Question

A building is insured for 75% of its value. The annual premium at 0.70 percent amounts to ₹ 2,625. If the building is damaged to the extent of 60% due to fire, how much can be claimed under the policy?

Answer 1

Let the property value of the building be ₹ x.
Since the building is insured for 75% of its value,
∴ Policy value = 75% of property value

= `(75)/(100) xx x`

= `(3x)/(4)`

Now, annual premium is ₹2,625 at 0.7%.
∴ Amount of premium = 0.7% of policy value

∴ 2,625 = `(0.7)/(100) xx (3x)/(4)`

∴ x = `(2,625 xx 100 xx 4)/(0.7 xx 3)`

∴ x = ₹ 5,00,000
∴ Property value of the building is ₹ 5,00,000.

Policy value = `(3 xxx)/(4)`

= `(3 xx 5,00,000)/(4)`

= `(15,00,000)/4`

= ₹ 3,75,000
Fire damaged the building to the extent of 60%.
∴ Loss = 60% of property value

= `(60)/(100) xx 5,00,000` = ₹ 3,00,000

Claim = `"Policy value"/"Property value" xx "Loss"`

∴ Claim = `(3,75,000)/(5,00,000) xx 3,00,000`
= ₹ 2,25,000
∴ ₹ 2,25,000 can be claimed under the policy.