Grace wants to insure her house and contents against fire, theft and flood and has bee
ouoted K3.46 per Kl 000 value of insurance for the building and K6.45 per K1 000 for
the contents. On top of the premium amounts there are statutory charges of 4% and then
o0ods and services tax (value-added tax) of 10%. There is an excess of K400 for any claime
on the contents. Grace's building is worth K120 000 and she is insuring it for KI20000
and her contents are insured for the full amount of K22 000
a. Calculate the premium for Grace's building and contents insurance, before charges and tax are applied
b. How much will the statutory charges and GST add to the cost of her policy?
c. How much will Grace pay per fortnight for her house insurance policy?
d. If Grace's building and contents are destroyed by fire, what amount will she receive
from the insurance company
a.
Premium for building insurance: K120,000 / K1,000 * K3.46 = K415.20
Premium for contents insurance: K22,000 / K1,000 * K6.45 = K141.90
Total premium before charges and tax: K415.20 + K141.90 = K557.10
b.
Statutory charges: 4% of K557.10 = K22.28
GST: 10% of (K557.10 + K22.28) = K57.338
Total charges and GST: K22.28 + K57.33 = K79.61
c.
Total cost of policy after charges and tax: K557.10 + K79.61 = K636.71
Fortnightly payment: K636.71 / 26 = K24.49
Grace will pay K24.49 per fortnight for her house insurance policy.
d.
If Grace's building and contents are destroyed by fire, she will receive:
Building insurance: K120,000 - K1,200 = K118,800
Contents insurance: K22,000 - K400 = K21,600
Total insurance payout: K118,800 + K21,600 = K140,400