Harbour Homes, a small property company, insures a vacant warehouse for $480 000. Its insurance policy charges a premium of 0.35% of the insured value each ...
Question 1 Report
Harbour Homes, a small property company, insures a vacant warehouse for $480 000. Its insurance policy charges a premium of 0.35% of the insured value each year. The company also pays an administration charge of $25.
(a) Calculate the annual insurance premium before the administration charge is added. Show your working. [2]
(b) Calculate the total amount paid by the company for insurance for one year. Show your working. [3]
(c) State one reason why the business may choose to insure the warehouse. [2]
Answer Details
(a) The annual premium is 0.35% of the insured value:
\[\$480\,000\times\frac{0.35}{100}=\$1680\]
Annual premium before the administration charge: $1680 [2].
(b) Add the administration charge:
\[\$1680+\$25=\$1705\]
The total insurance cost for one year is $1705 [3].
(c) Insurance protects the company against a large financial loss [1]. If an insured event damages the warehouse, the policy can provide money to repair or replace it [1].
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