Question on: JAMB Commerce - 2013
If Mr. N takes a fire insurance policy with average clause, his compensation will be
A
N 5000
B
N 7, 500
C
N 70, 000
D
N 75, 000
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Correct Option: B
Here's how to calculate the compensation with the average clause:
-
Understand the Average Clause: The average clause in insurance means the insurer will only pay a proportion of the loss, based on the relationship between the insured value and the actual value of the property. The formula is:
- Compensation = (Insured Value / Actual Value) * Loss
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Identify the Values:
- Insured Value = N75,000
- Actual Value = N100,000
- Loss = N10,000
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Apply the Formula:
- Compensation = (N75,000 / N100,000) * N10,00
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