Chapter 3 Consumer Mathematics: Insurance

1. Khairul bought a car. He insured his car under the comprehensive policy. Khairul
drove the car on a rainy day. His car lost control and crashed into a motorcycle.
Khairul and the motorcyclist were injured and both vehicles were damaged. Can
Khairul make
(a) a claim for the damages for both the vehicles?
(b) a claim for the medical expenses for the motorcyclist?
(c) a claim for the medical expenses for himself?

2. Melisa owned a condominium unit. Her condominium unit was damaged

because the condominium unit below her unit caught on fire. Melisa has
purchased fire insurance for her condominium unit. Determine whether she can
make a claim for the loss suffered.

3. Devika underwent heart surgery at a private hospital. The treatment cost of

RM320000 was borne by the insurance company. Apart from that, Devika is
given a hospital allowance of RM 250 per day.
(a) Determine the type of insurance purchased by Devika.
(b) Hence, state two policies involved.

4. Mr Chong buys an insurance. The insurance provides coverage to the

policyholder who suffers an injury, disability and death cause by accident only.
State the type of insurance purchased by Mr Chong.

5. Suraya travels to Germany. She lost her language when arriving at Frankfurt
Airport. Suraya gets compensation from the insurance she bought.
(a) State the type of insurance purchased by Suraya.
(b) Hence, state other two risks covered by the insurance.
Part B
1. Helen and her friends plan to travel to Australia. The table shows the premiums
for travel insurance offered by Safe Insurance.
Number of Rate (RM)
days Adult Senior citizen Child Family
1-5 30 30 20 70
6-10 45 45 30 110
11-15 60 60 42 160
16-22 80 80 56 210

(a) State two factors that determine the total premium for the insurance.
(b) One of Helen’s friends is a senior citizen. Is there a difference in premium
between Helen and her friend?

2. Ng family plans to travel to Canada for 25 days. The tables show the premiums
for travel insurance offered by Safe Insurance and the information of members
of Ng family.

Member of Ng family: Mr Ng, Mrs Ng, Eldest son (working), Second son
(secondary school) and youngest son (secondary school).

Number of Rate (RM)

days Adult Senior citizen Child Family
1-5 50 50 36 133
6-10 80 80 58 200
11-15 113 113 85 300
16-22 147 147 109 400
Each additional 45 45 35 110
week

Family plan is a plan for a family consisting of a husband, a wife and children
who are still studying in school. Calculate the total premium for travel insurance
of Ng family.
Part C
1. The table shows the annual premium rate per RM 1000 face value of a yearly
renewable term insurance offered by MM Insurance.

Male (RM) Female (RM)

Age
Non-smoker Smoker Non-smoker Smoker
34 2.09 2.68 1.42 1.75
35 2.13 2.73 1.46 1.79
36 2.19 2.81 1.51 1.85

a. State two factors that cause the increase in premium rate based on the table.
Explain.
b. Mr Ravi is 36 years old and a smoker. He wants to buy an insurance policy
worth RM 160 000. Calculate his annual premium.
c. Mrs Lee is 34 years old, healthy and a non-smoker. She bought the insurance
policy worth RM 300 000 and a critical illness policy. The critical illness
policy provides protection of 40% of basic face value and the premium rate
is RM1.74 per RM 1000. Calculate Mrs Lee’s annual premium.

Part D
1. Encik Faizal wants to renew his car insurance. The information of his car and the
premium rates under the Motor Tariff for motor policies issued in Peninsular
Malaysia are as follows.

Sum insured RM 80 000

Engine capacity 1500 cc
Location Pahang
NCD 30%

Engine capacity not Comprehensive policy Third party policy (RM)

exceeding (cc) (RM)
1400 273.80 120.60
1650 305.50 135.00

Calculate the gross premium for Encik Faizal’s car if he wants to insures his car
under
(a) The comprehensive policy
(b) The third party, fire and theft policy
(c) The third party policy
 2. Shamsul bought a personal accident insurance from an insurance company. The
table shows some of the benefits of the personal accident insurance.
Annual premium
Benefit Total coverage
Class 1 & 2 Class 3
Accidental death and RM 300 000
permanent disability
Death due to infectious disease RM 80 000
RM
Medical treatment (per Up to RM 50 000 RM 561.62
1038.82
accident)
Daily hospital allowance (up RM 150
to 365 days per accident)

Class 1 – Occupation in low risk industries and in office.

Class 2 – Occupation involving non-manual works with semi-hazardous industry.
Class 3 – Occupation involving manual works and use of tools or machinery.

(a) Why is the premium for class 1 and occupation lower than class 3?
(b) Shamsul had a road accident and was hospitalised for 12 days. He was
permanently disabled. The total cost of treatment was RM 56 380. Calculate
the total compensation paid by the insurance company to Shamsul.

Part E
1. Mrs Hui insured her car under the comprehensive policy with a deductible
provision of RM 300. Mrs Hui suffered three accidents during the insurance
coverage period. The losses in the first, second and third accidents were RM
2350, RM 800 and RM200 respectively. Determine whether Mrs Hui can make
a claim for the losses in each of those accidents. State the compensation amount
that can be claimed for each accident.

Accident Loss Can make a Compensation

claim? amount
(Yes, No)
First RM 2350
Second RM 800
Third RM 200
2. Encik Zainul has purchased motor insurance for his car without a deductible
provision. He named his wife, Puan Norish as the additional driver. His car was
damaged in two accidents. In the first accident, Encik Zainul’s car was driven by
his wife and the loss suffered was RM 7000. In the second accident, Encik
Zainul’s car was driven by his friend and the loss suffered was RM 4500.
Determine whether Encik Zainul can make a claim for the losses in each of those
accidents. State the amount of compensation that can be claimed for each
accident.

Accident Loss Can make a Compensation

claim? (Yes, No) amount
First RM 7000
Second RM 4500

3. Eric has purchased a medical insurance policy with a deductible provision of RM

10000 per year and annual limit of RM 200 000. Eric underwent two surgeries
in the same year during the insurance coverage. The first and second surgery
costs are RM9000 and RM 148 000 respectively. State the amount borne by Eric
and the amount paid by the insurance company for the first and second surgery.

Surgery Cost Amount borne by Amount paid by

Eric insurance
company
First RM 9000
Second RM 148 000

4. Puan Lina has purchased a medical insurance policy with a deductible provision
of RM 15 000 per year and annual limit of treatment with chemotherapy in 2020
after the surgery. The surgery cost in 2019 is RM 300 000 and the treatment cost
for the chemotherapy in 2020 is RM 35 000. State the total amount paid by Puan
Lina and the total amount paid by the insurance company in the two years.

Surgery Cost Amount paid by Amount paid by

Puan Lina insurance
company
First (Year 2019) RM 300 000
Second (year RM 35 000
2020)
Total
Part F
1. Asmadi, Mazim, David and Rajan bought fire insurances from the same
insurance company. The insurable value of their houses is the same, which is
RM 500 000. The fire insurance policy offered has a co-insurance provision to
insure 90% of its insurable value and a deductible of RM 3000.

(a) Calculate the amount of insurance required for each house.

(b) All the four houses caught on fire. The table below shows the amount of
insurance purchased and the loss suffered by the four houses.
Policyholder Asmadi Nazim David Rajan
Amount Amount of RM 300 000 RM 400 000 RM p
insurance insurance
bought required
Loss RM 200 000 RM 60 000 Total loss RM 120 000
(i) Calculate the amount of compensation received by Asmadi, Mazim and
David
(ii) Calculate the co-insurance penalty of Nazim.
(iii) Rajan received a compensation of RM 93 000. Calculate the value of p.

2. Mr Lim underwent a surgery. The total cost of his surgery and treatment was
RM88200. Mr Lim has a major medical insurance policy with an annual limit of
RM100 000, a deductible of RM 300 and a 80/20 co-insurance percentage
participation clause in his policy. Calculate the medical cost borne by the
insurance company and Mr Lim himself.
Medical cost after deductible
Medical cost borne by the insurance
company
Medical cost borne by Mr Lim

3. Yati has a major medical insurance policy with a deductible of RM 200 and a
75/25 co-insurance percentage participation clause in her policy. She underwent
an appendix surgery. The total medical cost does not exceed the annual limit.
She received a compensation of RM 6330 from the insurance company.
Calculate the total medical cost of Yati and hence, calculate the medical cost
borne by Yati herself.