Скачать или смотреть Indemnity Explained (With Examples) | Insurance Definitions

Learn the definition of indemnity in insurance, including examples of how indemnity works and different forms of indemnification.

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Indemnity is the main function of insurance.

To indemnify someone is to repay them following a financial loss, otherwise known as “making them whole.” Indemnity is a promise from one party to another: Party A will indemnify Party B if Party B suffers a financial loss. In exchange for the promise, Party B pays a premium to Party A.

This is precisely what’s happening when you buy an insurance policy: you pay the insurer a premium, and they’ll indemnify you if you suffer a loss (within the terms of your policy).

Indemnification isn’t always in the form of cash equal to the financial loss; there are a few ways insurance providers calculate it.

For example: they can repair damaged property instead of paying for its value. Or, they can replace damaged property that can’t be repaired. When replacing property, it’s usually with new property of similar kind and quality.

And finally, there are sometimes simple cash settlements. This most often happens when the damaged property can’t be repaired or replaced, like with priceless collectibles or pieces of art. Often, an insurance customer can opt for a cash settlement instead of replacing their damaged property as well, but the cash value may be a lot less than the value of a replacement item.

You can read your own insurance policy to see which forms of loss settlement apply to which losses.

00:00 Intro + definition
01:07 Repairing damaged property
01:44 Replacing damaged property
02:34 Cash settlements

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