Q.For what amount should a cargo worth ₹25,350 be insured so that in the event of loss, its value as well as cost of insurance may be recovered, the rate of premium being 2.5%?

If $V$ is the sum insured, premium $= 2.5\%$ of $V$, and $V - 0.025V = 25{,}350 \Rightarrow 0.975V = 25{,}350 \Rightarrow V = ₹26{,}000$.

Let the policy (sum insured) be $V$. The premium paid is $2.5\%$ of $V$, i.e. $0.025V$.

On total loss the insurer pays $V$; for this to recover both the value of the cargo (₹$25{,}350$) and the premium spent, we need …