What Does Indemnity Agreement Mean?
An indemnity agreement is a legally binding contract or agreement in which one party agrees to pay for certain losses incurred by the other, if those losses occur under certain circumstances. Insurance contracts are a very common example of indemnity agreements.
Insuranceopedia Explains Indemnity Agreement
Insurance companies agree to indemnity contracts because the other party promises to make payments to them as a condition of the contract. In general, the more coverage the insurance company agrees to provide as part of the indemnity agreement, the higher the premiums the policyholder will have to pay them.
Since indemnity agreements are legally binding, insurance companies have a legally enforceable obligation to provide coverage under the terms stipulated in the contract.