Q.A building is insured for 75% of its value. The annual premium at 0.70 percent amounts to ₹ 2,625. If the building is damaged to the extent of 60% due to fire, how much can be claimed under the policy?

Premium $₹2625$ at $0.70\%$ gives a policy value of $₹3{,}75{,}000$ ($=75\%$ of the property value, so property $=₹5{,}00{,}000$); under the average clause the claim $=0.75\times(\text{60\% loss})=₹2{,}25{,}000$.

Step 1 — policy (insured) value from the premium:

$0.70\%\ \text{of policy value} = 2625$

$\text{Policy value} = \dfrac{2625}{0.007} = ₹3{,}75{,}000.$

Step 2 — property value: the policy covers $75\%$ of the value, so

$\text{Property value} = \dfrac{3{,}75{,}000}{0.75} = ₹5{,}00{,}000.$

Step 3 — loss due to fire $=60\%$ of the property value $=0.60\times5{,}00{,}000 = ₹3{,}00{,}000.$

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