Indemnity

What Does Indemnity Mean?

Indemnity refers to compensation or payment for losses or damages, typically as part of a contractual agreement or insurance policy between two parties, the insurer and the insured, in exchange for premium payments.

How quickly and reliably an insurer pays out indemnity claims is one of the main differences between the best life insurance companies. The size of the indemnity payment also depends on how much coverage you buy, which is why average life insurance costs vary widely by age and policy size.

Insuranceopedia Explains Indemnity

For example, if Person A enters into a life insurance contract with Company B, agreeing that Company B will cover the losses suffered by his family in the event of his death in exchange for his premium payments, then upon his death (while the contract is still valid), Company B will pay the agreed-upon amount to his beneficiaries as indemnity, serving as compensation for his loss of life.

Since indemnity payouts go to whoever the policyholder names, it pays to understand the rules around naming life insurance beneficiaries before signing a contract.