Explain the indemnity principle and why claim payments are tied to covered loss rather than opportunity for gain.
A claim payment is not a shopping spree; it is a policy-defined recovery for covered loss. The Principle Indemnity means the policy aims to put the insured in a comparable financial position after a covered loss, subject to policy terms. That may mean actual cash value, replacement cost, repair cost, legal damages, or another valuation method. The exact measure comes from the policy. Why It Works The insurance pool depends on claim payments being connected to real loss. If losses created gains, prevention incentives weaken and premiums rise. Indemnity is one reason adjusters ask for proof of ownership, receipts, inventories,…
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