Devender having a textile business maintains stocks to operate his business. He took a declaration fire insurance policy with the following details: Sum insured: ₹1,00,00,000 Rate per thousand: 1.00 Premium paid in advan

Calculation of average sum insured Month Amount of Stock in ₹ January 58,00,000 February 56,00,000 March 46,00,000 April 30,00,000 May 30,00,000 June 30,00,000 July 30,00,000 August 40,00,000 September 40,00,000 October 40,00,000 November 40,00,000 December 40,00,000 Total 4,80,00,000 Average sum insured = 4,80,00,000/12 = ₹40,00,000 Premium on average sum insured at ₹1 per 1000 will be ₹4000 i.e. (40,00,000 / 1000) * 1 = ₹4000 Amount of refund of premium: Premium Received in Advance ₹10,000 Excess Premium paid = 10,000 - 4,000 = ₹6000 According to rule of refund = excess premium paid or 50% of advance premium whichever is less (6000 or 5000 whichever is less) i.e. ₹5000