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Question
Solve the following :
For what amount should a cargo worth ₹25,350 be insured so that in the event of total loss, its value as well as the cost of insurance may be recovered when the rate of premium is 2.5 %.
Solution
Given, Property value of cargo = ₹25,350,
Rate of premium = 2.50 %
Let the policy value be ₹100, which includes the premium ₹2.50.
∴ Value of cargo = Policy value – Premium
= 100 – 2.50 = ₹97.50
For the property value of ₹97.50, the policy value is ₹100.
∴ For property value of ₹25,350,
Policy value = `(25,350 xx 100)/(97.50)` = ₹26,000
∴ Cargo worth ₹25,350 should be insured for ₹26,000.
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