Consumer Mathematics: Insurance · Form 5
Reading a simple policy in numbers
A basic policy is described by a few figures, the sum insured, the premium rate, the premium, and sometimes a co-insurance percentage or the item's value, and the skill is knowing which number is which before you calculate anything.
What each figure is
Read a policy as a small set of labelled numbers. The sum insured is the ceiling on any payout; the premium rate is usually a price per RM1000 of cover; the premium is the yearly amount you pay; a co-insurance percentage or the item's true value tells you how a loss would be split.
For example, 'value RM60,000, rate RM4 per RM1000, co-insurance 90%' packs four different roles into one line.
Sort the numbers before you calculate
Most mistakes in this topic are not arithmetic errors, they come from putting the right number in the wrong place. If you first tag each figure as 'ceiling', 'rate', 'yearly cost', or 'share', the calculation that follows almost writes itself.
A rate 'per RM1000' is a strong hint you will multiply by (sum insured ÷ 1000), while a percentage next to a value hints at a shared loss.
Sum insured is not market value
The number to watch is the sum insured: students often treat it as the item's market value, but a policy can insure something for less, or the value may be stated separately. When those two differ, the gap is exactly what drives the average clause and shared losses.
Read the labels literally, and treat this as general information rather than advice on any real policy.
Source:DSKP KSSM Mathematics Form 4 and 5 (Versi English)
Frequently asked questions
How can I tell the sum insured apart from the item's actual value in a question?
The sum insured is the amount stated in the policy as what's covered; the item's value is what it's actually worth. They're often equal, but when a question gives both and they differ, that's a signal you're dealing with under-insurance, which changes how the payout is calculated.
What formula do I use when the sum insured is lower than the item's value?
Scale the loss down proportionally: payout = (sum insured ÷ item's value) × loss. This reflects that you only insured part of the item's worth, so you're only compensated for that same proportion of the loss, using the full loss amount without scaling is the usual mistake.
What's the clearest way to set out a policy question for full marks?
List every given figure with a label first, sum insured, item's value, premium rate, co-insurance percentage, before choosing a formula. Policy questions mix several similar-looking numbers, and labelling them clearly stops you from substituting the wrong one and helps the marker follow your working.