Indemnity Basis

What Does Indemnity Basis Mean?

An indemnity basis is the amount of money that an insurance company will pay for a risk based on what is written in the policy. This means that damage or loss may be paid in full or in part depending on the terms of the insurance contract.

Insuranceopedia Explains Indemnity Basis

Indemnity in insurance is a concept contingent on insurance itself, which means that a person should only be for paid a loss and not profit from it. Indemnity basis in insurance makes sure that this concept works in an insurance policy purchased. Thus, once a person insures a risk, the insurer has a basis for the amount of money that will be paid out if that risk occurs. This amount is ideally matched to the cost of the loss and does not exceed it.