What Does Indemnitee Mean?
An “indemnitee” is the person or business that receives indemnity from another party, called the indemnifier, in a written agreement called an indemnity contract. An insurance contract is a type of indemnity contract.
When you sign an insurance contract, you—as the indemnitee—agree to pay a certain price (the insurance premium) in exchange for the promise that the insurance company will protect and provide financial security to you. The insurance company— as the indemnifier—says that in the event of insured peril (fire, flood, physical damage, etc.) they will provide you the protection and security by getting you back to the same financial position you were in before the loss—they will indemnify you.
For example, if your house burns in a fire, you would have suffered a financial loss—you no longer have your home and your belongings and will have to replace/repair them as well as continue to pay the mortgage.
In your insurance contract, as the indemnitee, the insurance company (the indemnifier) will provide protection and security (indemnity) for you by providing you a monetary payout for the loss to repair/rebuild your home, amongst other coverages.
In the insurance contract, it will specify exactly who the indemnitee is—they are usually the owner of the property or vehicle. For example, if you finance a car with your spouse, both you and your spouse would be the indemnitees on the contract.
Commonly in insurance contracts and declaration pages, they will refer to you as the “insured” rather than the “indemnitee” throughout the documents, as it is already specified at the start of the contract who the indemnitee is in the insuring agreement.
An indemnitee can either be an individual or a business entity.
Insuranceopedia Explains Indemnitee
An indemnity clause can be added to any type of contract. This clause transfers the legal or financial responsibility of loss from one party to another under specified circumstances. Some may refer to this as a “hold harmless” agreement. An indemnity clause may be added to a sales contract that holds the producer harmless if an injury occurs from the use of the product. For example, a chainsaw company may include an indemnity clause that says they are not responsible for any injuries caused by the irresponsible operation of the machine.
Each indemnity contract (including the insurance contract) will have certain losses and circumstances that the indemnifier will and will not cover. For example, some insurance companies will reimburse for hotels if you must live somewhere else while the home is being rebuilt. While it is the indemnifier’s promise to get you in the same financial position you were before the loss, there may be instances they will refuse to cover or will add additional clauses into the contract restricting coverage. This can be for various reasons such as the loss being too expensive for the insurance company to cover (earthquake or floods on beach-front properties).
As the indemnitee, you also will have promises that you must keep in order to be indemnified after a loss. For example, most insurance contracts say that you must do your best to make sure your property is not at risk of being damaged or lost—such as locking your doors to prevent theft or keeping your home in good working order. It is always important to read the fine print and speak to your broker to make sure you get the coverage you need so you are fully protected as the indemnitee.