Question

A car valued at ₹8,00,000 is insured for ₹5,00,000. The rate of premium is 5% less 20%. How much will the owner bear including the premium if value of the car is reduced to 60% of its original value.

Answer 1

Given, the value of the car (property value) = ₹ 8,00,000

Policy value = ₹ 5,00,000

The rate of premium is 5% less 20%

i.e., 5% − 20% of 5% = 5% − 1% = 4%

∴ Amount of premium = 4% of policy value

= `(4)/(100) xx 5,00,000`

= ₹ 20,000

The value of car is reduced to 60% of its original value.

∴ Reduced value = 60% of original value

= `(60)/(100) xx 8,00,000`

= ₹ 4,80,000

∴ Loss = Original Value of car − Reduced value of car

= 8,00,000 − 4,80,000

= ₹ 3,20,000

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

∴ Claim = `(5,00,000)/(8,00,000) xx 3,20,000`

= ₹ 2,00,000

∴ Actual loss borne by the owner

= Loss – Claim + Premium

= 3,20,000 – 2,00,000 + 20,000

= ₹ 1,40,000

∴ Loss borne by the owner is ₹1,40,000.