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🏛️ '''Indemnity insurance''' is a category of [[Definition:Insurance policy | insurance coverage]] designed to reimburse the [[Definition:Policyholder | policyholder]] for actual losses sustained, up to the [[Definition:Policy limit | policy limit]], rather than paying a fixed or predetermined amount. It encompasses much of the [[Definition:Property and casualty insurance (P&C) | property and casualty]] market — including [[Definition:Property insurance | property]], [[Definition:Liability insurance | liability]], and [[Definition:Professional indemnity insurance | professional indemnity]] lines — and operates on the core principle that the insured should be returned to their pre-loss financial position without gaining a windfall.

🔍 A [[Definition:Claim | claim]] under an indemnity insurance policy requires the insured to demonstrate that a covered event occurred and to quantify the resulting financial damage. The [[Definition:Insurance carrier | carrier's]] [[Definition:Claims adjuster | adjusters]] then verify the loss, applying [[Definition:Policy terms and conditions | policy conditions]], [[Definition:Exclusion | exclusions]], [[Definition:Deductible | deductibles]], and any [[Definition:Coinsurance | coinsurance]] provisions to arrive at the settlement amount. For [[Definition:Professional indemnity insurance | professional indemnity]] policies — commonly carried by [[Definition:Insurance broker | brokers]], accountants, and consultants — the insurer covers financial losses the policyholder causes to third parties through negligent acts or omissions. In [[Definition:Reinsurance | reinsurance]], [[Definition:Indemnity-based reinsurance | indemnity-based treaties]] mirror this approach: the [[Definition:Reinsurer | reinsurer]] reimburses the [[Definition:Cedant | cedant]] based on the cedant's actual incurred losses rather than a modeled or parametric trigger.

💡 Indemnity insurance remains the dominant paradigm across global insurance markets because it aligns incentives between insurer and insured — the insured has no economic motivation to inflate or fabricate claims beyond actual damages. This structure also supports the operation of [[Definition:Subrogation | subrogation]], enabling insurers to recover payments from third parties responsible for the loss. As newer models like [[Definition:Parametric insurance | parametric insurance]] gain traction in areas such as [[Definition:Catastrophe insurance | catastrophe]] and [[Definition:Crop insurance | crop coverage]], the contrast with indemnity insurance sharpens: parametric products trade precision for speed, while indemnity products prioritize accurate loss compensation even at the cost of longer settlement timelines.

'''Related concepts'''
{{Div col|colwidth=20em}}
* [[Definition:Indemnity principle]]
* [[Definition:Professional indemnity insurance]]
* [[Definition:Liability insurance]]
* [[Definition:Parametric insurance]]
* [[Definition:Valued policy]]
* [[Definition:Subrogation]]
{{Div col end}}

Definition:Indemnity insurance - Revision history

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