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JAMB Commerce 2021 Paper

Question : 27

Total: 40

NAME	INSURED AMOUNT(₦)	ACTUAL VALUE(₦)	ACTUAL LOSS(₦)
Mr. P Mr. K Mr. R	25,000 30,000 40,000	100,000 120,000 150,000	30,000 40,000 50,000

Use the table above to answer questions 27 and 28

If Mr. P takes a fire insurance policy with average clause, his compensation will be

Solution:

Concept:

An average clause reduces a claim when the property is under-insured, paying only the proportion that the insured amount bears to the actual value.

Explanation:

For a claim with an average clause, the formula is:

\text{Compensation} = \frac{\text{Insured amount}}{\text{Actual value at loss}} \times \text{Actual loss}

For Mr. P:

Insured amount = ₦25,000

Actual value = ₦100,000

Actual loss = ₦30,000

Substitute into the formula:

\frac{25,000}{100,000} \times 30,000

= 0.25 \times 30,000

= ₦7,500

So, Mr. P's compensation is ₦7,500.

Answer:

A. ₦7,500

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