Use the table above to answer this question
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
Correct Answer: Option B
Explanation
Average clause: A clause in a policy requiring that, where assets are insured for less than their full value, the insured is required to bear a proportion of any loss.
The actual amount of claim is determined by the formula:
Claim = Loss Suffered x Insured Value/Total Cost
30,000 x 25,000 = 750,000000
750,000000 /100,000 = 7,500