Part 3:
Applications in Social Arithmetic

3.4 House Insurance

There are usually two policies to be considered: contents insurance and buildings insurance. The amount paid annually for this is called the premium.

Buildings insurance is often calculated by considering the area of the house.

Example 3.4a

A house is in the shape of a rectangle 10.2 metres by 11.3 metres and is on two floors. The rate for buildings insurance is £0.43 per square metre. Calculate the premium.

Solution:
The premium  = Area in square metres × Rate per square metre
= 10.2 × 11.3 × 2 × £0.43
= £99.12

Contents insurance is often calculated as a rate per cent, i.e. so much per £100 of contents insured.

Example 3.4b

A couple wish to insure the contents of their house for £23,400. What is their premium if the rate is 65p per £100 insured?. Normally this has to be paid in one instalment, but for an interest charge of 10% they can pay monthly. What is the monthly payment?

Solution:
£23,400 is the same as 234 hundreds, so the annual premium is 234 x £0.65 = £152.10

For monthly payments they will have to pay a total of 1.10 x £152.10 = £167.31 which divides by 12 to give £13.95 per month.