Skip to content

CMA Intermediate · Financial Accounting · Insurance Claim for Loss of Stock and Loss of Profit

Under a loss of profit policy, the claim for a shortfall in turnover is ₹60,000 before applying average. The policy was taken for ₹3,00,000, whereas the annual gross profit for the policy period was ₹5,00,000. The claim payable after average is:

The payable claim is ₹36,000. The policy covers only three-fifths of the annual gross profit of ₹5,00,000, so the average clause reduces the ₹60,000 claim proportionately: 60,000 x 3,00,000/5,00,000 equals ₹36,000.

  1. A₹60,000
  2. B₹36,000Correct
  3. C₹1,00,000
  4. D₹30,000

Explanation

Average clause: Claim x Policy amount / Annual gross profit = 60,000 x 3,00,000/5,00,000 = ₹36,000. Paying the full ₹60,000 ignores underinsurance, and ₹30,000 uses the wrong ratio of one half.

Did you get it right without looking?

One question tells you little. A timed set on Insurance Claim for Loss of Stock and Loss of Profit shows your real accuracy, how long you take and where you lose marks.

Practise Insurance Claim for Loss of Stock and Loss of ProfitFree diagnostic mock

More Insurance Claim for Loss of Stock and Loss of Profit questions