INSURANCE
46 | Under-insurance
FORMULA USED TO CALCULATED
UNDER-INSURANCE
[Insured amount รท Value at risk] x Total
loss.
Example 1:
Equipment is insured for R10 000. The ac-
tual replacement value of the equipment is
R20 000. Should the equipment be dam-
aged by fire and it would cost R8 000 to
repair, the payment of the insurance claim
will be calculated as follows:
[R10