To calculate a claim, turn the policy wording into numbered steps and follow them in the order stated. The loss is the starting point, and the claim can never be more than the loss.
This lesson belongs to insurance mathematics. If the terms are new, read interpreting premium, deductible and co-insurance first.
How do I turn a policy into steps?
Underline each condition, then number them in the order the wording gives.
- Start with the loss.
- Subtract the deductible, if the policy says so first.
- Apply any percentage share.
- Compare with the policy limit and take the smaller amount.
Not every question has all four. Use only the ones the wording states.
Worked example: a car repair claim
An original policy: the deductible is RM750 and the policy limit is RM8 000. The condition says “the deductible is subtracted first, then the limit applies”. The repair loss is RM9 500.
Step one, subtract the deductible: 9 500 − 750 = RM8 750. Step two, compare with the limit: 8 750 is above 8 000, so the insurer pays RM8 000.
The policyholder bears 9 500 − 8 000 = RM1 500. Check: 8 000 + 1 500 = 9 500, the whole loss.
Why does order change the answer?
Suppose a student applies the limit first. The limit caps RM9 500 at RM8 000, and then subtracting RM750 gives RM7 250.
The two answers differ by RM750 because the stated order matters. If the policy had said “the limit applies first”, RM7 250 would be correct.
The lesson is to underline the order words, such as “first”, “after” and “then”, before you calculate anything.
A second example where the limit is not reached
Take the same policy with a loss of RM4 200. After the deductible: 4 200 − 750 = RM3 450, which is below the limit of RM8 000. The insurer pays RM3 450.
In this case the limit never matters. A student who always writes “8 000” has forgotten to compare.
A self-check question
A policy states: deductible RM600, then a limit of RM10 000. Find the insurer’s payment for a loss of RM12 000 and for a loss of RM5 000.
Answer
For RM12 000: 12 000 − 600 = 11 400, which is above the limit, so the insurer pays RM10 000. For RM5 000: 5 000 − 600 = 4 400, below the limit, so the insurer pays RM4 400. Both answers are below the loss, as they must be.
Keep your steps in the mistake log tool if you slip, and revisit the percentage steps with the algebra step repair trainer. Next, see distinguishing life and general insurance.
If claims still flip under time pressure, SPM Mathematics one-to-one tuition lets a teacher watch the order you choose and correct it on the spot.