When can indemnity be claimed?

When can indemnity be claimed?

• A. For any amount greater than the initial insured value
• B. Only for the extent of financial loss incurred
• C. Only if the policy allows for profit beyond loss
• D. For the entire value of the property regardless of loss

Answer: (B)

Indemnity in the context of insurance is based on the principle that the insured should be compensated only for their actual financial loss. This principle is fundamental to many types of insurance and prevents the insured from profiting from a loss. When a claim for indemnity is made, the insured is entitled to receive compensation that directly corresponds to the extent of their financial loss. This means if a property is damaged or lost, the insured can claim only the amount necessary to cover that specific loss, thus restoring them to a financial position as if the loss had not occurred. The focus on financial loss ensures that the insurance system operates fairly and helps maintain lower premiums for policyholders, as it discourages fraudulent claims and over-insurance. By adhering to this principle, indemnity aims to uphold the integrity of insurance contracts and the industry as a whole.

Indemnity in the context of insurance is based on the principle that the insured should be compensated only for their actual financial loss. This principle is fundamental to many types of insurance and prevents the insured from profiting from a loss.

When a claim for indemnity is made, the insured is entitled to receive compensation that directly corresponds to the extent of their financial loss. This means if a property is damaged or lost, the insured can claim only the amount necessary to cover that specific loss, thus restoring them to a financial position as if the loss had not occurred.

The focus on financial loss ensures that the insurance system operates fairly and helps maintain lower premiums for policyholders, as it discourages fraudulent claims and over-insurance. By adhering to this principle, indemnity aims to uphold the integrity of insurance contracts and the industry as a whole.