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WAEC Commerce 2012 Question 43

Question 43

Insurance

Mr. Lou who assured his life with XYZ Assurance Company, was involved in an accident and had a broken leg; the sum of ₦80,000 was paid to Mr. Lou for his broken leg. The money received is known as

  1. A.compensation.
  2. B.commission.
  3. C.premium.
  4. D.indemnity.
Show the answer and explanation

Answer: A (compensation.)

Explanation

Indemnity means restoring the exact money loss, which applies to property insurance. A payment for an injury under personal accident or life cover is a fixed sum paid as compensation.