Indemnity — Insurance Claims Definition
General
The principle of restoring the insured to the same financial position as before the loss, without profit.
Indemnity is the foundational principle that insurance pays for actual economic loss, not a windfall. Property policies pay repair or replacement costs subject to limits; life insurance is a notable exception paying a fixed benefit.
Subrogation supports indemnity by preventing double recovery from tortfeasor and insurer.
Examples
After theft of a laptop, the insurer pays the lesser of replacement cost or limit so the insured is made whole but cannot keep the laptop and cash profit.
Common Mistakes
Policyholders expect new-for-old without regard to limits; indemnity still caps at policy terms. Confusing indemnity with penalty damages.
