ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -The purpose of the indemnity principle is to set back the insured at the same financial position as he was before the loss occurred. Principle of indemnity is observed strictly for property insurance and not applicable for the life insurance contract.

Detailed explanation-2: -Indemnification. A principle of insurance which states that the individual should be restored to the approximate financial position he or she was in prior to the loss.

Detailed explanation-3: -Life insurance does not relate to a contract of indemnity because the insurer does not promise to indemnify the insured for any loss on maturity or death of the insured but agrees to pay a sum assured in that case.

Detailed explanation-4: -An agreement under which one party shifts to another the responsibility for a loss. Three types which exist are (1) hold harmless agreements, (2) exculpatory agreements, and (3) indemnity agreements.

Detailed explanation-5: -Indemnity is one party’s promise to compensate another for potential losses or damages. Indemnification is the act of compensating another party after a loss has occurred. In an indemnity contract, the indemnitee is protected from liability and the indemnitor holds the indemnitee harmless.