What Does Indemnity Mean?

The concept refers to a legally binding agreement made between two or more parties to provide one party for any harms or damages with means of counterbalance. The indemnifying party or the insurer may or may not be liable for the damage experienced by the insured, but in both cases he or she must pay an evaluated sum of money based on the loss as an indemnification.

Indemnity may be arranged in different forms such as reparation, replacement, a payment in cash, or by reinstatement.

Indemnity Explained

The term is very common in the field of general insurance and it stands for an insurance policy which obliges the insurer to secure the policy holder against any hurt, damage or loss that he or she is insured for. This is done by giving recompense to the insured. So if a person is entitled to an indemnity, in case damage occurs the person will receive from the insurer a sum of money based on the suffered loss. For a compensation to be given to the insured, the indemnity must be unexpired.