Third class Insurance

Computations of Indemnity & contribution

Exercise (1)

El Hoda Company has a building with amount of $600,000 and it makes a

policy against all accidents in the following insurance companies:

1) 180,000 in company A

2) 90,000 in company B

3) 30,000 in company C

Suppose an explosion has taken place and lead to actual loss $100,000.

Calculate the contribution of each company to the actual losses in the

following cases: -

1- In case of applying average condition

2- In case of not applying average condition / general rule.

Third class Insurance
Solution

In case of applying average condition) relativity clause( .

total face amount

Indemnity = actual loss×
value of subject matter

300,000
= 100,000×
600,000

= 50,000

face amount of each company

Share = indemnity ×
Total Face Amount

180,000
Share of A = 50,000 × = 30,000
300,000

90,000
Share of B = 50,000 × = 15,000
300,000

30,000
Share of C = 50,000 × = 5,000
300,000
Third class Insurance

In case of not applying average condition / general rule.

Indemnity = the actual loss, but the maximum limit, total face amount

or value of subject matter, any one less

Indemnity = 100‫و‬000

face amount of each company

Share = indemnity ×
sum of face amount

180,000
Share of A = 100,000 × = 60,000
300,000

90,000
Share of B = 100,000 × = 30,000
300,000

30,000
Share of C = 100,000 × =1,000
300,000