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JAMB Commerce 1998 Question 25

Question 25

Insurance

Insurance companies operate on the principle of indemnity. This means that an insured person or firm collects

  1. A.only half of the loss suffered
  2. B.double the value of the loss suffered
  3. C.the total sum of the premiums paid prior to the loss
  4. D.damage claims equal to the loss suffered.
Show the answer and explanation

Answer: D (damage claims equal to the loss suffered.)

Explanation

Indemnity restores the insured to the position before the loss, paying no more and no less than the loss.