All RE5 questions
Financial Products Apply knowledge of the financial products and services environment
A house worth R1 000 000 is insured for R600 000 under a short-term policy subject to average. A fire causes damage of R200 000. Ignoring any excess, how much will the insurer pay?
RE5 practice question with a worked answer. This is one of hundreds of FSCA RE5 questions in the RegulatoryExams question bank.
- a) R600 000
- b) R200 000
- c) R120 000Correct
- d) R80 000
Why this is the answer
Where property is under-insured and average applies, the insurer pays the loss in the proportion that the sum insured bears to the value: R200 000 × R600 000 / R1 000 000 = R120 000. The client carries the remaining R80 000. The full loss is paid only where the sum insured equals the value at risk.
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