Question

A fire occurs at a factory where the sum insured is RM810,000. Value of the factory...

A fire occurs at a factory where the sum insured is RM810,000. Value of the factory at time of loss is RM850,000. The amount of loss on indemnity basis is RM115,000

  1. What will be the amount of indemnity settlement?

  1. If the policy carries the ‘Reinstatement Memorandum’ and the value of risk at time of             reinstatement is RM930,000, while the loss on reinstatement basis is RM124,000, what will be the amount of settlement?

  1. If the value at risk at time of reinstatement is RM970,000, what will be the new                 amount of settlement?

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Answer #1

Solution.>

Sum Insured = RM 810,000

Value of Factory = RM 850,000

Amount of Loss on Indemnity Basis = RM 115,000

Part a> Indemnity Settlement

Settlement = ( Sum Insured / Value of factory ) x Amount of Loss on indemnity basis

Settlement = ( RM 810,000 / RM 850,000 ) x RM 115,000

Therefore, Settlement = RM 1,09,588.24

Part b> Reinstatement Settlement

Settlement = ( Sum Insured / Value of risk ) x Amount of Loss on reinstatement basis

Settlement = ( RM 810,000 / RM 930,000 ) x RM 124,000

Therefore, Settlement = RM 1,08,000

Part c> Reinstatement Settlement

Settlement = ( Sum Insured / Value of risk ) x Amount of Loss on reinstatement basis

Settlement = ( RM 810,000 / RM 970,000 ) x RM 124,000

Therefore, Settlement = RM 1,03,546.4

Note: Give it a thumbs up if it helps! Thanks in advance!

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