Consumer Mathematics: Insurance · Form 5
Consumer Mathematics: Insurance: Revision Notes
A tight revision summary of Consumer Mathematics: Insurance for SPM Mathematics, the key ideas, the formulae the exam gives you, and what to focus on before the paper.
The big idea
This chapter treats insurance as a mathematics problem: understanding risk, working out premiums, and calculating coverage and claims. It is a consumer-mathematics topic, so the goal is to compute the figures a question gives, not to give any real financial or insurance advice.
Key ideas to revise
- Risk and premium. A premium is what you pay for cover. The chapter computes premiums from the rates a question provides.
- Coverage and claims. Coverage is the amount insured; a claim works out what is paid out under the terms in the question.
- Read the terms exactly as given. Every rate and condition comes from the question. Use them literally, these are not real, current insurance figures.
Every key idea as a quick worked number
- Risk to premium (rate per RM1,000): a fire policy is quoted at RM5 per RM1,000 of cover. For a sum insured of RM70,000, premium = (70,000 ÷ 1,000) × 5 = 70 × 5 = RM350.
- Premium after a No-Claim Discount (NCD): a basic motor premium is RM1,400 and the owner earns a 25% NCD. Payable = 1,400 × (1 − 0.25) = 1,400 × 0.75 = RM1,050.
- Coverage and a claim with an excess: a claim is RM4,300 and the policy excess is RM600. The insurer pays = 4,300 − 600 = RM3,700.
- Average (co-insurance) clause: stock worth RM60,000 is insured for only RM45,000; a loss of RM12,000 pays out (45,000 ÷ 60,000) × 12,000 = 0.75 × 12,000 = RM9,000.
- Read the terms literally: if the question states a rate of 2.5%, use 0.025 exactly. Premium on RM80,000 = 0.025 × 80,000 = RM2,000, the figure the question gives, not a real-life rate.
A pre-paper checklist for this chapter
- Re-derive the premium two ways: premium = rate × sum insured when the rate is a percentage, and premium = (sum insured ÷ 1,000) × rate when it is quoted 'per RM1,000'. Mixing these is the top premium error.
- The exam gives you every rate, the sum insured, the excess and whether an average clause applies, none of it is assumed knowledge. Underline each one before you write a line.
- Fix the order of a payout: apply the average clause first, then subtract any excess, then remember the answer can never exceed the actual loss.
- Remember an NCD acts on the premium only, never on the sum insured and never on the claim.
- The habit that saves marks: write the rule in words, substitute the numbers, then compute, the examiner awards the method line even when the arithmetic slips.
Source:DSKP KSSM Mathematics Form 4 and 5 (Versi English)
Frequently asked questions
Do I need to memorise an insurance formula for the exam?
There is no single formula-sheet entry for insurance; you rebuild each figure from the question. Premium is a rate applied to the cover, while a payout applies the average fraction and then subtracts the excess.
Learn the reasoning rather than one formula, and always work directly from the numbers printed in front of you.
How should I lay out an insurance answer to keep the method marks?
Write each computation as a labelled line, premium, then discount, then amount payable, and show the substitution before the result. If the final number is wrong, a clear line such as '(45,000 ÷ 60,000) × 12,000' still earns the method mark, so never collapse the whole calculation into one silent keystroke on the calculator.
The question mentions percent and 'per RM1,000' which do I use?
Use exactly the wording given. A percentage rate multiplies the sum insured directly: 2% of RM80,000 = RM1,600.
A 'per RM1,000' rate needs the cover divided by 1,000 first: RM5 per RM1,000 on RM80,000 = 80 × 5 = RM400. They are different methods, so read which one the question printed.