A sole proprietor insured his goods worth N200,000 for half the value. There was a fire accident in which goods valued N80,000 were destroyed. The value of compensation expected from the insurer is
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Correct Answer: Option A
Explanation:
The goods were worth N200,000, but they were insured for only half of their value, which is N100,000. Under the average principle, the insurer pays the same proportion of the loss as the proportion of the goods that was insured. Therefore, compensation is N80,000 × N100,000/N200,000 = N40,000.
The goods were worth N200,000, but they were insured for only half of their value, which is N100,000. Under the average principle, the insurer pays the same proportion of the loss as the proportion of the goods that was insured. Therefore, compensation is N80,000 × N100,000/N200,000 = N40,000.