Question

6. A farmer buys insurance for $100,000 that will reimburse him up to $200,000 if his crops are totally destroyed. After observing the damages from a flood, he receives $150,000 in compensation from the insurance company. The indemnity is...

7.  A farmer buys insurance for $100,000 that will reimburse him up to $200,000 if his crops are totally destroyed. After observing the damages from a flood, he receives $150,000 in compensation from the insurance company. The premium is...

8.  A farmer buys insurance for $100,000 that will reimburse him up to $200,000 if his crops are totally destroyed. After observing the damages from a flood, he receives $150,000 in compensation from the insurance company. The liability is...

9.  A farmer buys insurance for $100,000 that will reimburse him up to $200,000 if his crops are totally destroyed. After observing the damages from a flood, he receives $150,000 in compensation from the insurance company. The premium rate is...

Answer 1

Sol. (6) $150,000 - Indemnity is the amount which the insured person received from the insurance company, in the given case it is $150,000.

(7) $100,000 - Premiun is the amount paid by the insured person to the insurance company, in the given case it is $100,000.

(8) $200,00 - Liability is the maximum amount payable by the insurance company to the insured or we can say the insurance coverage amount, in the given case it is $200,000

(9) $0.5 - Premium rate is the amount payable for every 1$ of insurance coverage, in the given case it is $100000/$200000.