Archive / Investment Adviser (Level 2) / Non-Life Insurance Products

nism-series-xb-copay-calculation-base-after-deductible[ INVESTMENT ADVISER (LEVEL 2) ]

In Giri's property insurance claim, what was the co-payment percentage, and on which amount was it calculated?

[ A ]20% calculated on total property value of Rs. 50 Lakhs

[ B ]5% calculated on the net admissible claim of Rs. 40,000 (after deducting the Rs. 10,000 deductible from the Rs. 50,000 gross claim)[ CORRECT ]

[ C ]10% calculated on annual insurance premium

[ D ]50% calculated on salvage scrap value

Takeaway

Giri's co-payment was 5%, applied to the net admissible claim of Rs. 40,000 after the Rs. 10,000 deductible was first subtracted from the Rs. 50,000 gross claim, so option B is correct.

Derivation

The claim-settlement sequence first applies the compulsory Rs. 10,000 deductible to the gross Rs. 50,000 claim, leaving an admissible claim of Rs. 40,000. The stated 5% co-payment is then applied to this reduced Rs. 40,000 admissible base, giving a Rs. 2,000 co-pay and a final reimbursement of Rs. 38,000. This tests whether candidates correctly identify both the co-payment percentage itself and, just as importantly, the specific base amount it applies to — a frequent source of error being co-pay applied to the gross claim or to an unrelated figure like the total sum insured or premium.

Why the others fail

A — 20% calculated on total property value of Rs. 50 Lakhs

Co-pay applies to the specific admissible claim amount for this event, not to the insured's total property valuation of Rs. 50 Lakhs.

C — 10% calculated on annual insurance premium

Co-payment is a claim cost-sharing mechanism applied to the admissible claim amount, not a percentage calculated on the annual insurance premium.

D — 50% calculated on salvage scrap value

Salvage or scrap value recovery is handled separately during the surveyor's loss assessment process, unrelated to the co-payment calculation on this claim.