Q.A property worth ₹4,00,000 is insured for its full value of ₹4,00,000 under a policy with an average clause. A fire causes a loss of ₹1,00,000. Find the claim admitted.

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 …