Question 1

Question 1: Find the premium on a property worth ₹ 25,00,000 at 3% if (i) the property is fully insured (ii) the property is insured for 80% of its value.

Accepted Answer

Case-1 Property value = ₹ 25,00,000 Rate of Premium = 3% Policy Value = ₹ 25,00,000 ∴ Amount of Premium = 3% × 25,00,000 = ₹ 75,000 Case-2 Property Value = ₹ 25,00,000 Policy value = 80% × 25,00,000 = ₹ 20,00,000 Rate of Premium = 3% ∴ Amount of Premium = 3% × 20,00,000 = ₹ 60,000

Question 2

Question 2: A shop is valued at ₹ 3,60,000 for 75% of its value. If the rate of premium is 0.9%, find the premium paid by the owner of the shop. Also, find the agents commission if the agent g

Accepted Answer

Property Value = ₹ 3,60,000 Policy Value = 75% × 3,60,000 = ₹ 2,70,000 Rate of Premium = 0.9% ∴ Amount of Premium = 0.9% × 2,70,000 = ₹ 2,430 Rate of Commission = 15% ∴ Amount of Commission = 15% × 2,430 = ₹ 364.5

Question 3

Question 3: A person insures his office valued at ₹ 5,00,000 for 80% of its value. Find the rate of premium if he pays ₹ 13,000 as premium. Also, find agent’s commission at 11%.

Accepted Answer

Property Value = ₹ 5,00,000 Policy Value = 80% × 5,00,000 = ₹ 4,00,000 Amount of Premium = ₹ 13000 Let the rate of Premium be x% Amount of premium = Rate × Policy Value ∴ 13000 = x% × 4,00,000 ∴ ∴ = x ∴ x = 3.25% Rate of commission = 11% ∴ Amount of Commission = 11% × 13,000 = ₹ 1,430

Question 4

Question 4: A building is insured for 75% of its value. The annual premium at 0.70 percent amounts to ₹ 2625. If the building is damaged to the extent of 60% due to fire, how much can be claim

Accepted Answer

Let the Property Value of building be ₹ x Policy Value = 75% × x = 0.75x Rate of Premium = 0.70% Amount of Policy = Rate × Policy Value 2625 = 0.70% × 0.75x = 0.70% × x 3520 = × x = x x = ₹ 5,00,000 ∴ Damage = 60% × Property Value = × 5,00,000 = ₹ 3,00,000 ∴ Policy Value = 0.75 × 3,00,000 = ₹ 2,25,0

Question 5

Question 5: A stock worth ₹ 7,00,000 was insured for ₹ 4,50,000. Fire burnt stock worth ₹ 3,00,000 completely and damaged there remaining stock to the extent of 75% of its value. What amount c

Accepted Answer

Property Value = ₹ 7,00,000 Policy Value = ₹ 4,50,000 Complete Loss = 3,00,000 Partial loss = 75% × [7,00,000 – 3,00,000] = × 4,00,000 = ₹ 3,00,000 ∴ Total loss = ₹ 3,00,000 + ₹ 3,00,000 = ₹ 6,00,000 ∴ Claim = × Loss = × 6,00,000 = ₹ 3,85,714.29

Question 6

Question 6: A cargo of rice was insured at 0.625 % to cover 80% of its value. The premium paid was ₹ 5,250. If the price of rice is ₹ 21 per kg. find the quantity of rice (in kg) in the cargo.

Accepted Answer

Let Property Value be ₹ x Policy Value = 80% × x = ₹ 0.8x Rate of Policy = 0.625% Amount of Premium = Rate × Policy value ∴ 5250 = 0.625% × 0.8x ∴ 5250 = 0.005x ∴ x = ∴ x = ₹ 10,50,000 Rate of Rice = ₹ 21/kg ∴ Quantity of Rice (in kg) = = = 50,000 kgs

Question 7

Question 7: 60,000 articles costing ₹ 200 per dozen were insured against fire for ₹ 2,40,000. If 20% of the articles were burnt and 7,200 of the remaining articles were damaged to the extent o

Accepted Answer

No of articles = 60,000 Cost of articles = ₹ 200/dozen ∴ Property of Value = × 200 = ₹ 1o,oo,ooo ∴ Policy Value = ₹ 2,40,000 Complete Loss = 20% × 10,00,000 = ₹ 2,00,000 Partial loss = × 200 × 80% = ₹ 96,000 ∴ Total loss = 2,00,000 + 96,000 = ₹ 2,96,000 Claim = × Loss = × 2,96,000 = ₹ 71,040

Question 8

Question 8: 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

Accepted Answer

Let the Policy Value of Cargo be ₹ 100 which includes insurance and other expenses ∴ Property Value = 100 – [2 + 0.075] = ₹ 97.925 If Policy Value is ₹ 100, then Property Value is ₹ 97.925 If Property Value is ₹ 3,50,100 Then policy Value = = ₹ 3,57,518.51

Question 9

Question 9: A property worth ₹ 4,00,000 is insured with three companies. A, B, and C. The amounts insured with these companies are ₹ 1,60,000, ₹ 1,00,000 and ₹ 1,40,000 respectively. Find the

Accepted Answer

Property Value = ₹ 4,00,000 Loss = ₹ 9,000 Total Value of Policies = 1,60,000 + 1,00,000 + 1,40,000 = ₹ 4,00,000 Claim = × Loss Claim of company A = × 9,000 = ₹ 3,600 Claim of company B = × 9,000 = ₹ 2,250 Claim of company C = × 9,000 = ₹ 3,150

Question 10

Question 10: 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 ear is reduced to 60% o

Accepted Answer

Property Value = ₹ 8,00,000 Policy Value = ₹ 5,00,000 Rate of Premium = 5% less 20% = 5% – 20% × 5% = (5 – 1)% = 4% Amount of Premium = 4% × 5,00,000 = ₹ 20,000 Loss = [100 – 60]% × Property Value = 40% × 8,00,000 = ₹ 3,20,000 Claim = × Loss = × 3,20,000 = ₹ 2,00,000 Loss bear by owner = Loss – clai

Question 11

Question 11: A shop and a godown worth ₹ 1,00,000 and ₹ 2,00,000 respectively were insured through an agent who was paid 12% of the total premium. If the shop was insured for 80% and the godown

Accepted Answer

Rate of Premium = 0.80% Less 20% = 0.80% – 20% × 0.80% = (0.80 – 0.16)% = 0.64% For Shop Property Value = ₹ 1,00,000 Policy Value = 80% × 1,00,000 = ₹ 80,000 Premium = 0.64% × 80,000 = ₹ 512 For Godown Property Value = ₹ 2,00,000 Policy Value = 60% × 2,00,000 = ₹ 1,20,000 Premium = 0.64% × 1,20,000

Question 12

Question 12: 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 p

Accepted Answer

Policy Value = ₹ 1,00,000 Rate of Premium = ₹ 56 per thousand p.a Rate of Rebate = ₹ 0.75 per thousand p.a Premium is paid annually ∴ Net rate of = 56 – 0.75 = ₹ 55.25 per thousand p.a. ∴ Net Amount ot Premium = × 55.25 = ₹ 5,525

Question 13

Question 13: A warehouse valued at ₹ 40,000 contains goods worth ₹ 2,40,000. The warehouse is insured against fire for ₹ 16,000 and the goods to the extent of 90% of their value. Goods worth ₹

Accepted Answer

For Warehouse Property Value = ₹ 40,000 Policy Value = ₹ 16,000 Loss = ₹ 8,000 Claim = × Loss = × 8,000 = ₹ 3,200 For Goods Property Value = ₹ 2,40,000 Policy Value = 90% × 2,40,000 = ₹ 2,16,000 Complete Loss = 80,000 Partial Loss = 80% × (2,16,000 – 80,000) = 80% × 1,36,000 = ₹ 1,08,800 Claim = × L

Question 14

Question 14: A person takes a life policy for ₹ 2,00,000 for a period of 20 years. He pays premium for 10 years during which bonus was declared at an average rate of ₹ 20 per year per thousand.

Accepted Answer

Policy Value = ₹ 2,00,000 Rate of Bonus = ₹ 20 Per thousand p.a. Total Bonus = = ₹ 4,000 ∴ Bonus for 10 years = 4,000 × 10 = ₹ 40,000 Period of Policy = 20 years ∴ Amount of Premium = = ₹ 10,000 p.a. ∴ Total Premium for 10 years = 10,000 × 10 = ₹ 1,00,000 ∴ Paid up Value of Policy = Total premium +

Chapter 2 Insurance and Annuity Ex 2.1 Solutions