Proportional repayment method includes average proportional repayment, increasing proportional repayment year by year and decreasing proportional repayment year by year. In 1950s, most of the public bonds issued in China were repaid in proportion year by year.
The advantage of proportional repayment is that it is beneficial for the government to arrange a sinking fund, so that there is a stable source of funds for repaying public debts. This repayment method can abide by the credit contract. The disadvantage of proportional repayment method is that the repayment period and proportion are determined in advance, and the government is less flexible and lacks flexibility when it is in financial difficulties, which is easy to make government finances passive.
practical application
For unvalued insurance, in actual claims, insurance companies generally use proportional compensation to make claims.
An unvalued policy only lists the insured amount as the maximum compensation amount, not the actual value of the insured property. When out of danger, if the insured amount is lower than the actual value at the time of property loss, it constitutes insufficient insurance amount. If the insured amount is insufficient and causes some losses, the insurance company shall calculate the compensation amount according to the proportion between the insured amount and the actual value of the insured property at the time of the accident.
The calculation formula is: insurance indemnity = loss amount × (insurance amount-actual value of the insured property when it is out of danger).
The compensation of proportional liability depends not only on the amount of loss, but also on the ratio of the insured amount to the insured value. The first dangerous liability compensation method, also known as the first loss liability compensation method, refers to the actual loss compensation within the insurance amount limit.