Question

The rate of premium on a policy of ₹ 1,00,000 is ₹ 56 per thousand per annum. A rebate of ₹ 0.75 per thousand is permitted if the premium is paid annually. Find the net amount of premium payable if the policyholder pays the premium annually.

Answer 1

Given, Policy value = ₹ 1,00,000
Rate of premium = ₹ 56 per thousand per annum
Rebate = 0.75 per thousand, if paid annually

∴ Rebate = `56 xx (0.75)/(1000)` = 0.042

∴ Net rate of premium
= Rate of premium – Rebate
= 56 – 0.042
= ₹ 55.958 per thousand
Let the policy value be ₹1,000
Then premium = ₹ 55.958
∴ For policy value of 1,00,000,

Net amount of perimum = `(55.958 xx 1,00,000)/(1,000)`

= ₹ 5,595.8
∴ Net amount of premium that policy holder pays annually is ₹ 5,595.8.