Indemnity

Indemnity is a type of insurance compensation paid for damage or loss.

Indemnity is a contractual agreement between two parties in which one party agrees to compensate for potential loss or damage caused by the other party.

Indemnity is also a legal and financial concept that refers to a contractual agreement in which one party (the indemnifier) agrees to compensate or reimburse another party (the indemnitee) for losses, damages or liabilities that she may incur. The primary purpose of indemnification is to protect a party from financial harm caused by specific events or circumstances.

Indemnity is the basis of many insurance contracts; For example, car owners can purchase different types of insurance to compensate them for different types of losses caused by driving, such as damage to the car or medical expenses after an accident.

In the agency context, the principal may have an obligation to compensate his agent for debts incurred in carrying out his responsibilities in the relationship.

Although the events giving rise to compensation may be specified in the contract, the actions taken to compensate the injured party are largely unpredictable and the maximum compensation is usually clearly limited.

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Types of Indemnity

Contractual Indemnity:

Contractual indemnification is the most common form of indemnification and occurs when parties enter into a contract that includes an indemnification clause.

This clause describes each party’s obligations and responsibilities in the event of specific events, such as breach of contract, accident or legal claim..

Professional Indemnity:

Professional liability insurance is a specialized form of indemnity designed to protect professionals such as doctors, lawyers, architects and accountants against claims of professional negligence or malpractice and omissions.

Product Indemnity:

Product compensation refers to a manufacturer’s responsibility to compensate consumers for injuries or damages caused by their defective products.

Companies often purchase product liability insurance to cover these potential liabilities.

Employer’s Indemnity:

Employers liability insurance protects employers against employee claims for injuries or illnesses that occur on the job. It ensures that employers can cover workers’ compensation costs.

Insurance is distinguished from guarantee in that:

Insurance guarantees compensation in the amount of damages to be compensated, while guarantee only guarantees compensation for the decrease in the value of the purchased asset. (and the beneficiary must prove this decrease in value).
Assurance requires beneficiaries to mitigate their losses, whereas indemnification does not.
Guarantees do not cover matters known to the beneficiary at the time the guarantee is granted, unlike insurance.