indemnity principle

The Indemnity Principle is a key concept in insurance that ensures a policyholder is compensated for a loss, but not more than the actual value of the loss. This principle prevents individuals from profiting from insurance claims. Essentially, it means that if something unfortunate happens—like damage to a car—the insurance payout will cover the repair costs or the value of the car, but not exceed it. This principle maintains fairness in the insurance system by ensuring that the insured is restored to their financial position prior to the loss, without receiving an undue benefit.