The rate of premium is 2% and other expenses are 0.075%. A cargo worth ₹3,50,100 is to be insured so that all its value and the cost of insurance will be recovered in the event of total loss. - Mathematics and Statistics

Sum

The rate of premium is 2% and other expenses are 0.075%. A cargo worth ₹3,50,100 is to be insured so that all its value and the cost of insurance will be recovered in the event of total loss.

Solution

Given, Property value of cargo = ₹ 3,50,100,

Rate of premium = 2%, Other expenses = 0.075%

Let the amount of insurance (policy value) be  ₹ 100, which includes the premium of ₹ 2 and other expenses of ₹ 0.075

∴ Value of cargo (property value)

= Policy value – (Premium + Other express)

= 100 – (2 + 0.075)

= 100 – 2.075

= 97.925

Now, for the property value of ₹ 97.925, the policy value is ₹ 100.

∴ For property value of ₹ 3,50,100, the policy value

= (3,50,100 xx 100)/(97.925)

= ₹ 3,57,518.5090

∴ A cargo worth ₹3,50,100 should be insured for ₹ 3,57,518.5090.

Concept: Concept of Insurance
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