Contract Of Indemnity
What Does Contract Of Indemnity Mean?
A contract of indemnity is a legal agreement between two parties in which one party agrees to compensate the other for a loss or damage that meets specific criteria and conditions, excluding certain specified circumstances.
An insurance contract is a common example of a contract of indemnity. This is why indemnity insurance for cars only pays out when a loss falls within the covered events listed in the policy.
Insuranceopedia Explains Contract Of Indemnity
In an insurance contract, the insurance company agrees to pay a specific amount to the insured for losses or damages, provided the insured pays the premium (a condition of the contract) and the damages or losses are not excluded from coverage in the contract.
The contract is valid for a specified period. Most homeowners insurance policies, for example, run for a year and have to be renewed before the term ends. After this period, all parties involved are released from their contractual obligations. In the context of insurance, this means that the company is no longer obligated to compensate the insured if they incur a loss.
