What is the principle of indemnity?
A) A court precedent that gives insureds the right to sue their insurers if they get bad claims service
B) The rule that a person may not collect more than his actual loss in the event of damage caused by an insured peril
C) The rule that a person will not be reimbursed for a loss unless he can show proof of loss
D) A way of requiring a person to pay a premium

Question

Quizplus · Accepted Answer

The principle of indemnity means that an insured person cannot collect more than the actual amount of their financial loss in the event of damage caused by an insured peril. This is to prevent someone from profiting from an insurance claim and maintain the insured's financial position pre-loss.

The other choices are not accurate:

A) This statement is talking about the right to sue for bad claims service, which is unrelated to the principle of indemnity.
C) The statement is referring to the requirement of proof of loss, which is a different concept than the principle of indemnity.
D) The statement is talking about paying a premium, which is also not related to the principle of indemnity.

What Is the Principle of Indemnity