What is Indemnity Insurance?

In contract law, an indemnity is a contractual obligation of one party to compensate the loss incurred by another party due to the relevant acts of the indemnitor or any other party. The duty to indemnify is usually, but not always, coextensive with the contractual duty to “hold harmless” or “save harmless”

Indemnity insurance is a type of insurance that provides financial protection to the policyholder in the event of a covered loss. The insurance company agrees to indemnify the policyholder, meaning to make them whole again, by paying for the covered losses.

Indemnity insurance can cover a wide range of losses, including property damage, bodily injury, and financial losses.

Some common types of indemnity insurance include:

Property insurance, such as homeowners insurance and commercial property insurance, covers damage to property from covered perils such as fire, theft, and weather events.
Liability insurance, such as auto insurance and general liability insurance, covers the policyholder’s legal liability for damages caused to others.
Professional liability insurance, such as medical malpractice insurance and errors and omissions insurance, covers professionals for financial losses caused by their negligence or errors in judgment.

Indemnity insurance policies typically have deductibles and coverage limits. The deductible is the amount that the policyholder must pay out of pocket before the insurance company starts paying. The coverage limit is the maximum amount that the insurance company will pay for a covered loss.

When an indemnity insurance policyholder experiences a covered loss, they should file a claim with their insurance company. The insurance company will investigate the claim and, if it is approved, will pay the policyholder for the covered losses up to the coverage limit.

Indemnity insurance is an important risk management tool for individuals and businesses. It can help to protect policyholders from the financial devastation of a covered loss.

Here are some examples of how indemnity insurance works:

A homeowner with homeowners insurance who experiences a fire would file a claim with their insurance company. The insurance company would investigate the claim and, if it is approved, would pay to repair or replace the damaged property up to the coverage limit.
A business owner with commercial property insurance who experiences a break-in would file a claim with their insurance company. The insurance company would investigate the claim and, if it is approved, would pay to repair or replace the stolen or damaged property up to the coverage limit.
A doctor with medical malpractice insurance who is sued for a medical error would file a claim with their insurance company. The insurance company would defend the doctor in court and, if the doctor is found liable, would pay the damages award up to the coverage limit.

Indemnity insurance can provide peace of mind knowing that you are financially protected in the event of a covered loss.