Indemnity refers to the protection that insurance can offer you from loss or damage, either to your person or your property. When you buy an indemnity policy, you can rest assured that you’ll get the money needed to replace the things you’ve lost or damaged in case of any unfortunate circumstances. This article will help you understand what indemnity means in insurance and why it’s so important to make sure it’s part of any policy that you purchase.
Why It’s Important
If you’re going to become a successful business owner, one of your biggest assets is being properly insured. Understanding what indemnity insurance covers—and how much it costs—can help ensure that your business can weather nearly any storm.
What is an example of indemnity?
Your health-insurance provider covers your hospital bill, but you pay for your prescriptions yourself. That’s an example of indemnity. If you have a deductible on your plan—that is, if you have to pay a certain amount out of pocket before coverage kicks in—you can also be on an indemnity plan. In that case, once you meet your deductible, your insurance company will cover 100 percent of any further medical expenses until you hit another annual limit (which might be more or less than your deductible). The upshot? You may not want to go with a PPO if many of your medical expenses are covered by deductibles.
Who pays the indemnity?
The essence of indemnity is to provide you with a certain amount of compensation if you make a claim. If your car crashes into someone else, who pays your claim? We’ll have to check if they purchased an indemnity policy; if they did, then they will be covered. But, if you haven’t, then you must purchase them. In case of an accident, it’s necessary to be covered by adequate indemnity insurance.
Is indemnity the same as liability?
Indemnity refers to a promise by an insurance company that they will indemnify or make whole someone who has been damaged. Liability is a legal obligation to pay damages (or some other form of compensation). While these two terms sound similar, they have very different meanings.
Conclusion
I hope this article serves its purpose of enlightening you on Indemnity: What it is in insurance and why you need it.