A building worth ₹12,00,000 is insured for ₹9,00,000 under an average-clause policy. Fire damages it to the ex

Exercises · Q15

Q. A building worth ₹12,00,000 is insured for ₹9,00,000 under an average-clause policy. Fire damages it to the extent of ₹4,00,000. The claim admitted is: (A) ₹4,00,000 (B) ₹3,00,000 (C) ₹9,00,000 (D) ₹1,00,000

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The building is under-insured (₹9,00,000 $<$ ₹12,00,000), so the average clause applies:

\text{Claim}=\frac{\text{Sum insured}}{\text{Value}}\times\text{Loss}=\frac{900000}{1200000}\times400000=\frac{3}{4}\times400000=₹3{,}00{,}000.

Hence option (B).

Why the other options are wrong:

(A) ₹4,00,000 pays the full loss, ignoring the average clause — valid only if the building were fully insured.
(C) ₹9,00,000 is the sum insured, not a partial-loss claim; a claim can never exceed the actual loss. …

Q.A building worth ₹12,00,000 is insured for ₹9,00,000 under an average-clause policy. Fire damages it to the extent of ₹4,00,000. The claim admitted is: (A) ₹4,00,000 (B) ₹3,00,000 (C) ₹9,00,000 (D) ₹1,00,000