The principle of indemnity

Question

Quizplus · Accepted Answer

The principle of indemnity is a fundamental concept in insurance that seeks to put the policyholder back in the same financial position they were in before the loss occurred. This helps reduce morale hazard because it ensures that policyholders do not profit from a claim and are incentivized to take reasonable steps to protect their assets. It applies to many types of insurance beyond just life and health, such as property and casualty insurance. While it does not completely eliminate insurance fraud, it helps discourage fraudulent claims by requiring proof of loss and limiting the amount that can be claimed.

The Principle of Indemnity