Indemnify

What Does Indemnify Mean?

To indemnify means to compensate someone for a loss. Insurance companies indemnify policyholders for covered losses. Guaranteed indemnification for covered losses is a fundamental principle of insurance and the primary reason individuals purchase insurance to protect against various risks. In auto coverage, this principle is the basis for what is called indemnity insurance for cars, where the insurer pays a settlement based on the vehicle’s market value at the time of the loss.

Insuranceopedia Explains Indemnify

Individuals, families, organizations, and businesses commonly purchase insurance to have various potential losses indemnified. In some cases, insurers only cover a portion of the loss or provide coverage after the policyholder has paid a deductible. The deductible amount directly reduces what the insurer pays out, so drivers reviewing their policy often have to weigh whether raising their auto insurance deductible makes financial sense for them. However, it is also common for insurers to fully indemnify losses.

Insurance contracts typically include “indemnity clauses,” which specify exactly which perils are covered and to what extent. For certain policies, these clauses may also outline the “indemnity period,” which is the duration during which the insurer will pay benefits for a covered loss.