Insurance

Question 2 (15 marks) a. Briefly explain the 'indemnity' insurance principle. Explain why indemnity' is not universally applicable to all types of insurance. 6 marks b. Foodie Restaurant purchased a freezer 3 years ago, which has an estimated useful life for 10 years. For insurance protection, the freezer is specifically insured under a Property All Risk insurance policy. Last night, the freezer was totally destroyed by flooded water during the passage of typhoon. At the time of loss, the replacement cost of a similar freezer was around $160,000. Assumed that the sum insured under the Property All Risks insurance Foodie Restaurant bought was adequate to cover the risk. Further, the property all risks insurance policy is subject to the following deductible clause: - $8,000 for water damage; $3,000 for any other loss i. Based on the actual cash value principle, how much of the claim payment will Foodie Restaurant receive under the Property All Risk insurance policy? 6 marks ii. How much will Foodie Restaurant collect as claim payment from the insurance company if the Property All Risk insurance is arranged on a 'new for old basis? 3 marks