Consumer Mathematics: Insurance · Form 5
Consumer Mathematics: Insurance: Worked Examples (Easier)
This set drills the core insurance formula: Premium = (sum insured ÷ 1000) × rate (or rate × sum insured when the rate is a percentage), plus a simple excess deduction. Good for building the basic technique before word problems.
General information only, not financial or insurance advice.
Worked example 1
A house is insured against fire for a sum insured of RM150,000. The premium rate is RM2.80 for every RM1,000 of the sum insured.
Find the annual premium.
- Formula: Premium = (sum insured ÷ 1000) × rate, since the rate is given per RM1,000.
- Number of RM1,000 units = 150,000 ÷ 1,000 = 150.
- Premium = 150 × RM2.80 = RM420.
Worked example 2
A motorcycle is insured for a sum insured of RM8,000. The premium rate is 3.5% of the sum insured.
Find the premium.
- The rate is a percentage, so Premium = rate × sum insured.
- Convert the percentage: 3.5% = 0.035.
- Premium = 0.035 × RM8,000 = RM280.
Worked example 3
A car repair after an accident costs RM3,200. The motor policy carries an excess of RM400 that the policyholder must bear.
How much does the insurer pay out?
- The excess is the fixed amount the policyholder pays first; the insurer pays the remainder.
- Insurer's payout = repair cost − excess = RM3,200 − RM400.
- = RM2,800.
Worked example 4
A shop is insured for RM120000 at a rate of RM2.50 per RM1000 of sum insured. Calculate the annual premium.
- Number of RM1000 units = 120000 ÷ 1000 = 120
- Premium = 120 × RM2.50 = RM300
Worked example 5
A car is insured for RM25000 at a premium rate of 4%. Calculate the annual premium.
- Premium = 4% × RM25000
- = 0.04 × 25000 = RM1000
Worked example 6
A theft causes a loss of RM7500. The policy has an excess of RM600 borne by the owner.
How much does the insurer pay?
- Insurer payout = loss − excess
- = 7500 − 600 = RM6900
Worked example 7
A fisherman insures his fishing boat for a sum insured of RM45,000. The premium rate is RM4.50 for every RM1,000 of the sum insured.
Find the annual premium.
- Number of RM1,000 units in the sum insured = RM45,000 ÷ RM1,000 = 45
- Annual premium = 45 × RM4.50 = RM202.50
Worked example 8
A trader insures her shop's stock (inventory) for a sum insured of RM18,000. The premium rate is 2.5% of the sum insured.
Find the annual premium.
- Annual premium = 2.5% × RM18,000
- = 0.025 × RM18,000 = RM450
Source:DSKP KSSM Mathematics Form 4 and 5 (Versi English)
Frequently asked questions
What foundational insurance concepts do easy questions test?
Easy questions check that you understand basic insurance terms, premium, sum insured, and the difference between life insurance and general insurance (like motor or fire insurance), and can read simple premium tables or rates to calculate a premium for a given sum insured.
What mistake do students make when reading premium rate tables?
Students often misread the rate as a fixed amount instead of a rate per unit (e.g. per RM1,000 of sum insured), leading to a premium that's far too small or too large.
Always check the units stated in the table and multiply correctly by the number of units in the sum insured.
What should students show when calculating a total premium?
Show the rate used, the number of units of sum insured, and the multiplication step clearly, rather than jumping straight to the final premium. If there's more than one type of coverage combined, calculate and label each part before adding them to reach the total premium.