ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Indemnity is a guarantee to restore the insured to the position he or she was in before the uncertain incident that caused a loss for the insured. The insurer (provider) compensates the insured (policyholder).

Detailed explanation-2: -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-3: -The indemnity principle means that the policy payout should restore the insured to the same financial position in which he was before the loss happened.

Detailed explanation-4: -In other words, principle of indemnity deals with the premise that in the event of a loss, the insurer must put the insured to the position in which he was before the loss occurred. This means that the insurer shall receive any compensation that is neither more nor less than the actual loss that has taken place.

Detailed explanation-5: -Indemnity, Principle of-a general legal principle related to insurance that holds that the individual recovering under an insurance policy should be restored to the approximate financial position he or she was in prior to the loss.